Pound Euro Exchange Rate News: GBP/EUR Fluctuated amid Surging German Industrial Production

April 6, 2023 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Fluctuated amid Surging German Industrial Production

Euro (EUR) Supported by Strong German Industrial Production

The Euro (EUR) traded with mixed success on Thursday amid a cautious market mood. Providing modest support, however, is better-than-expected industrial production in the bloc’s largest economy.

German industrial production surprised to the upside and printed far above expectations. Against market predictions of a paltry 0.1% rise, factory activity surged by 2% in February. The latest printing of German factory data signals a strong rebound in the vital recovery of the country’s economy. With factory orders jumping up on Wednesday, EUR investors will welcome the rebound. Carsten Brzeski, Global Head of Macro at ING, commented:

‘German industry seems to have woken up from hibernation. Despite the strong rebound, industrial production is still slightly below its pre-pandemic level.’

With industrial production expected to continue strengthening in the coming months, Germany and the rest of the Eurozone look to shrug off the Covid hangover and the Ukraine invasion headwinds. Franziska Palmas, Senior Europe Economist at Capital Economics, said of the outlook:

‘A high backlog of orders, lower energy prices and easing supply constraints should continue to support production.’

Pound (GBP) Supported by Stabilising Housing Market

Meanwhile, the Pound (GBP) continued to cling onto its gains despite a quiet trading calendar. A rebounding housing market could be propping the Pound up.

Halifax revealed that house prices in the UK rose by 0.8% in the month of March, marking the third consecutive month of climbing prices. However, the annual rate did slow to the lowest level in almost four years. But after following February’s 1.2% climb, investors are cheering that the housing market could finally be stabilising. Anthony Codling, Housing Analyst at Twindig, is confident that the rebound will continue, adding:

‘This is not the story of a house price crash, but rather one where house prices are falling upwards. In our view, three main factors have led to this positive pricing trend:

‘The mini-budget spike in mortgage rates has been reversed.

‘In a more stable financial market mortgage lenders are more willing to lend.

‘Wage increases are allowing homebuyers to secure larger mortgages.’

Elsewhere, the Bank of England (BoE) released their Monthly Decision Maker (DMP) panel survey on Thursday morning. Members of the DMP expected headline inflation to decline to 5.8% in a year’s time, down from 5.9% last month. The survey also revealed that businesses expect their output prices are set to rise an average of 5.3% over the next year. With inflation expectations continuing to fall, rate hike bets could also follow suit, sapping demand for Sterling.

GBP/EUR Exchange Rate Forecast: Cautious Market Mood to Weigh on Euro?

Looking ahead, the Pound Euro exchange rate could be left to trade on global market sentiment amid a lack of data and the UK markets closing for Easter. Without any data for the Pound or Euro, investors will have to look elsewhere for direction.

Friday will see major employment data for the US released. The negative correlation the Euro shares with the US Dollar could see movement if the data surprises to the upside. Better-than-expected non-farm payrolls data could send the ‘Greenback’ climbing, denting the Euro.

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