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Pound Euro Exchange Rate News: GBP/EUR Steady Following Eurozone GDP Figures

October 29, 2021 - Written by John Cameron

Euro (EUR) Buoyed by Upbeat GDP Figures

The Euro (EUR) is consolidating Thursday’s gains this morning, following the publication of the Eurozone’s latest GDP release.

According to preliminary figures published by the European statistics agency, Eurostat, the Eurozone economy expanded by 2.2% in the third quarter.

This matched the growth seen in the second quarter and beat forecast growth in the bloc would slow slightly to 2%.

While EUR investors welcomed the upbeat release, it was undermined somewhat by the earlier release of Germany’s GDP figures.

These saw the Eurozone’s largest economy report that growth slowed from an upwardly revised 1.9% to 1.8%, missing forecasts Germany's economy would expand by 2.2% in Q3, and raising concerns about an uneven recovery in the Eurozone.

Carsten Brzeski, Global Head of Macro at ING, commented:

‘The German economy will most likely only return to its pre-crisis level at the start of next year; later than many other eurozone economies. The big fiscal boost that almost the entire world was talking about last year, which should have brought Germany out the pandemic faster than most other countries, has become a victim of global supply chain frictions.’

Pound (GBP) Muted amid Brexit Jitters

At the same time, the Pound (GBP) is mostly muted this morning, amidst renewed Brexit uncertainty.

This comes as a spat between the UK and France over post-Brexit fishing rights looks to overshadow ongoing talks regarding the renegotiation of the Northern Ireland protocol.

France has threatened to prevent British vessels from landing in its ports if a dispute over licences for French boats is not revolved by early next week.

In response the UK government has summed the French ambassador, with environment secretary George Eustice, threatening to response in kind.

GBP investors fear that the spat could derail attempts by the UK and EU to reach a compromise over the Northern Ireland protocol, with analysts fearing it could devolve into a trade war if the UK invokes article 16.

GBP/EUR Exchange Rate Forecast: BoE in the Spotlight Next Week

Looking ahead to next week’s session, it seems safe to assume that the main catalyst of movement in the Pound to Euro (GBP/EUR) exchange rate will be the Bank of England’s (BoE) latest interest rate decision.

GBP investors are no longer expecting an interest rate hike from the BoE in November, so the focus will likely shift to the bank’s forward guidance.

This could see the Pound soar if the BoE indicates that a December rate hike is on the cards, whilst also signalling plans for further hikes in 2022.

In contrast, should the BoE signal that it is unlikely to raise interest rates before Christmas, then Sterling could tumble.

Meanwhile, the focus for EUR investors is likely to be on the publication of Germany’s latest industrial data.

These could help to buoy the Euro next week if they indicate growth if order growth and production Germany’s vital manufacturing sector improved in September.
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