Pound Sterling to Euro (GBP/EUR) Exchange Rate Extends Losses as German Trade Beats Forecasts

Steady German Exports Dent Pound Sterling Euro (GBP/EUR) Exchange Rate

UPDATE: As June’s German trade data bettered forecasts, this has left the Pound Sterling to Euro (GBP/EUR) exchange rate on a downtrend.

Investors were encouraged to find that German export volumes had stagnated on the month, rather than contracting -0.4% as anticipated.

This painted a slightly more encouraging picture of the economic health of the Eurozone’s powerhouse economy, offering the Euro (EUR) a fresh boost against its rivals on Tuesday.

Pound Sterling Euro (GBP/EUR) Exchange Rate Losses Ground as Eurozone Investor Confidence Improves

UPDATE: If Eurozone data generally continues to fall short of forecast, however, this is likely to erode the recent gains of EUR exchange rates.

Unless the currency union demonstrates greater signs of economic resilience the mood towards the Euro could easily deteriorate, given ongoing international trade worries.

Higher Eurozone Investor Confidence Adds to Pound Sterling Euro (GBP/EUR) Exchange Rate Weakness

UPDATE: A better-than-expected Eurozone Sentix investor confidence put further pressure on the Pound Sterling to Euro (GBP/EUR) exchange rate today.

As investor sentiment strengthened from 12.1 to 14.7 in August this encouraged hopes that the Eurozone economy could find support in the second half of the year.

This allowed the Euro (EUR) to extend its gains against Pound Sterling (GBP) in spite of the weaker nature of the morning’s German data.

Pound Sterling to Euro (GBP/EUR) Exchange Rate Weakens as Brexit Anxiety Mounts

Fears over the prospect of the UK crashing out of the EU without a deal prompted the Pound Sterling to Euro (GBP/EUR) exchange rate to slump sharply at the start of the week.

Comments from international trade secretary Liam Fox encouraged investors to pile out of Pound Sterling (GBP) once again, with markets unimpressed by the suggestion that a no deal Brexit is now the more likely outcome.

Following hot on the heels of a warning from Bank of England (BoE) Governor Mark Carney, this left GBP exchange rates in a bearish mood, reigniting speculation over the future of the UK economy.

With the domestic economy already showing signs of strain amid the heightened air of uncertainty investors have seen little reason to favour the Pound, regardless of last week’s BoE interest rate hike.

German Factory Order Contraction Fails to Boost GBP/EUR Exchange Rate

The weakness seen in the Pound to Euro (GBP/EUR) exchange rate was slightly limited by the disappointing nature of the latest German factory orders.

Confidence in the outlook of the Eurozone’s powerhouse economy was dented as factory orders were found to have contracted -0.8% on the year in June, disappointing optimistic forecasts of a 3.4% uptick.

This significantly weaker reading further undermines hopes that the Eurozone economy will recover its lost momentum in the months ahead, with the negative impact of global trade tensions continuing to bite.

July’s German construction PMI also disappointed expectations, slumping from 53 to 50 as the sector failed to demonstrate any expansion on the month.

Even so, this was not enough to dent the Euro (EUR) on Monday morning as data largely took a back seat to political jitters.

Outlook: Pound Sterling Euro (GBP/EUR) Exchange Rate to Rally on Falling German Exports

A similarly disappointing showing from June’s raft of German trade data could offer the Pound Sterling to Euro (GBP/EUR) exchange rate a lifeline, however.

As long as the German economy continues to come under pressure from US protectionism and the threat of a global trade war the appeal of the Euro is likely to remain muted.

Forecasts point towards a modest contraction in exports on the month, something which could weigh heavily on the single currency.

The publication of the European Central Bank (ECB) Economic Bulletin for July may also diminish the confidence of EUR exchange rates if the tone of policymakers proves dovish.

Any signs of increased caution within the ECB would leave the Euro vulnerable to a fresh round of selling.

Solid UK Gross Domestic Product Forecast to Halt GBP/EUR Exchange Rate Slide

The Pound Sterling to Euro (GBP/EUR) exchange rate is likely to experience further volatility ahead of the weekend on the back of the second quarter UK gross domestic product data.

Markets expect to see a modest acceleration in economic growth of 0.4% on the quarter, doubling the lacklustre growth of 0.2% seen in the first three months of the year.

While this would still leave the UK lagging behind many of its rivals in terms of growth the Pound is likely to strengthen in response to any improvement in the economic outlook.

On the other hand, if the GDP data falls short of expectations the Pound Sterling to Euro (GBP/EUR) exchange rate may extend its losses once again.

Hannah Wilson

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