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Pound Euro (GBP/EUR) Exchange Rate Flat as German Data Confirms Expectations of ‘V’-Shaped Recovery

August 7, 2020 - Written by John Cameron

Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as German Exports Jump 14.9%

The Pound Sterling Euro (GBP/EUR) exchange rate remained flat on Friday, leaving the pairing trading at around €1.1074.

The Euro received some support this morning after data revealed that overall export demand in Germany increased.

Demand from China helped manufacturers in the bloc’s largest economy recover from the coronavirus lockdown for the second month in a row. However, output remained far below levels seen just a year ago.

Industrial output from Germany jumped 8.9% in June which was fuelled by the 14.9% jump in exports, the largest monthly increase in almost 30 years.

The latest data from the bloc confirmed economists’ expectations of a ‘v’-shaped rebound in the bloc.

However, the country still has a way to go before growth returns to pre-coronavirus levels, as the current data brings industrial production back to 85% of its pre-crisis level.

According to ING’s Chief Economist for the Eurozone and Global Head of Macro, Carsten Brzeski:

‘All in all, today’s data confirm that at least the rebound after the lifting of the lockdown measures is v-shaped. With all the risks of a second lockdown wave, an increase of permanent unemployment and structural changes to the economy stemming from Covid-19, it is however very unlikely that this ‘v’ will last for long.’

Sterling (GBP) Muted as Sunak Say ‘Hardships’ Still Lie Ahead

The Pound remained flat against the single currency on Friday, just a day after making significant gains following a surprisingly upbeat Bank of England (BoE).

On Thursday, the BoE said that while the economy would not recover until the end of 2021, its short-term projections were far more optimistic compared to May’s meeting. This boosted the Pound, although the currency retreated today.

However, Sterling remained flat today after Britian’s finance minister, Rishi Sunak said that while the forecasts represent an improvement on the old ones, the predictions still show hardships lie ahead for the UK.

Speaking to BBC News, Rishi Sunak said:

‘It’s an improvement from when they last did their forecast. But [...] they are right to say that hardship lies ahead.’

Added to this, the Chancellor commented on the government’s furlough scheme. He noted that it was wrong to keep people ‘trapped’ by the false hope of the scheme.

When questioned whether he would extend the scheme for the worst-hit sectors he said:

‘It’s wrong to keep people trapped in a situation and pretend that there is always a job that they can go back to.’

Pound Euro Outlook: UK Unemployment and German ZEW in Focus

Looking ahead to next week, the Pound (GBP) could suffer losses against the Euro (EUR) following the latest UK employment data.

If Britain’s unemployment rate jumps higher than expected in June thanks to the coronavirus crisis, it will send Sterling lower.

However, the pairing could be left flat on Tuesday following disappointing German data.

If August’s ZEW Economic Sentiment Index tumbles further than expected as markets focus on the risks of a second wave of the virus the single currency will slump. This will leave the Pound Euro (GBP/EUR) exchange rate largely flat.

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