Pound Euro Exchange Rate News: GBP/EUR Muted as Key German Data Misses Forecast

October 7, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Muted as Key German Data Misses Forecast

GBP/EUR Exchange Rate Muted as German Data Signals Winter Recession

The Pound to Euro (GBP/EUR) exchange rate was flat on Friday afternoon as data from earlier in the European session impeded the currency pair’s movement.

At time of writing the GBP/EUR exchange rate traded at around €1.1400, which was roughly the same as Friday’s opening levels.

Euro (EUR) On the Back Foot as Investors Worry about Troubling German Data

The Euro (EUR) lacked support on Friday as data from Germany printed poorer than expected.

Germany industrial production contracted more than expected in August. Economists predicted a 0.5% contraction, but industrial production actually shrank by 0.7%. This, coupled with German sales data dropping from 0.7% in July to -1.3% in August, signalled an economic downturn in the Eurozone’s biggest economy.

This fear was already being underpinned by the downbeat composite PMI for the Eurozone from earlier this week. Mateusz Urban from Oxford Economics said:

‘We expect the eurozone to fall into a recession, starting in Q3 and lasting three quarters. But despite the deteriorating outlook, inflation risks remain acute, as evidenced by surging costs reported by firms, as well as their continued ability to pass them onto consumers.’


As a result, the Euro struggled as investors began to worry about the approaching recession.

Pound (GBP) Mixed as Investors Focus on BoE Comments

The Pound (GBP) was muted against the Euro on Friday, but was trading in a broad range amongst its other peers.

Sterling saw some big swings in movement on Friday as lowering house prices clashed with higher mortgage rates and labour productivity in Q2 increased from -0.6% to 0.3%.

The afternoon saw the currency trade on comments made by Bank of England (BoE) policymaker Dave Ramsden.

Ramsden told the Securities Industry Conference:

‘However difficult the consequences might be for the economy, the MPC must stay the course and set monetary policy to return inflation to achieve the 2% target sustainably in the medium term, consistent with the remit given to us.’


Expectations of aggressive interest rate hikes would normally cheer investors, but faced with so much uncertainty in the wake of the mini-budget the Pound’s upside was limited. The UK’s housing market is at risk of a crash as soaring interest rates see mortgages rates surge, pricing many people out of the market. Sterling was mixed on Friday as investors had to ruminate on the shifting economic landscape.

GBP/EUR Exchange Rate Forecast: Euro to be Bolstered by Hawkish ECB Speech?

Looking ahead to next week, movement for the Pound Euro exchange rate could be driven by a speech from European Central Bank (ECB) President Christine Lagarde.

Investors will be focused on Lagarde’s speech as she could hint at the ECB’s next policy decision. At the moment, investors are betting on a 75bps in the next meeting. However, any dovish comments made by Lagarde could dent the single currency.

In the meantime, the Euro will likely remain sensitive to developments within Ukraine. If the Ukrainian military regains more land, the Euro could get a boost.

Looking at the UK, jobs data will likely drive trade on Tuesday. The unemployment rate for August is forecast to remain the same at 3.6%. Is it possible that unemployment could follow labour productivity and print better than expected and shore up the Pound?

GBP investors will likely continue to trade on domestic headlines as markets are still readjusting to the mini-budget’s aftermath. Any comments from Liz Truss or her cabinet could see significant movement in Sterling.

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TAGS: Pound Euro Forecasts