Pound Sterling to Euro (GBP/EUR) Exchange Rate Jumps Despite Cut in Bank of England Growth Forecast

Pound to Euro Exchange Rate Surges Following BoE Decision amid Brexit Speculation

UPDATE: Despite the Bank of England (BoE) cutting its UK growth forecasts today, the Pound Sterling to Euro (GBP/EUR) exchange rate saw a jump in demand in the early afternoon.

Investors were relieved that Bank of England (BoE) Governor Mark Carney indicated an interest rate cut was still unlikely.

On top of this, comments from UK Labour Party’s shadow Brexit Secretary Sir Keir Starmer that a second referendum remains an option for the party made Sterling (GBP) more appealing.

Pound to Euro Exchange Rate Could Climb Further if Upcoming German Data Disappoints

UPDATE: The Pound Sterling to Euro (GBP/EUR) exchange rate continued to advance on Wednesday afternoon and was on track to regain around half of this week’s losses.

Concerns about Germany’s worsening economic outlook and the possibility that the nation was headed towards a recession left the Euro (EUR) unappealing and the shared currency tumbled throughout the day.

GBP/EUR investors are now anticipating further signs regarding Germany’s economy, so tomorrow’s German industrial production and Friday’s trade balance results could be particularly influential.

Pound to Euro Exchange Rate Continues to Edge Higher Despite Lack of Pound Support

UPDATE: Despite a lack of fresh reasons to buy the Pound (GBP) today, amid lasting Brexit uncertainties, the Pound Sterling to Euro (GBP/EUR) exchange rate has continued to climb.

Investors kept buying the Pound versus an unappealing Euro (EUR) in reaction to the latest German data, which worsened concerns about Germany’s economy and the possibility of a recession in the nation.

One of the biggest concerns of the day was regarding German factory orders, but Germany’s January construction PMI was disappointing too and fell from 53.3 to 50.7.

Pound to Euro (GBP/EUR) Exchange Rate Recovery Limited amid UK Economic and Brexit Fears

This morning’s German data continued a concerning trend, indicating that Germany’s economy was slowing at a faster pace than expected. However, Brexit fears prevented the Pound Sterling to Euro (GBP/EUR) exchange rate from recovering all of this week’s losses.

Since opening this week at the interbank level of €1.14, GBP/EUR has largely trended with a downside bias. GBP/EUR hit a fortnight low yesterday afternoon and is rebounding this morning, but still remains around a third of a cent below the week’s opening levels.

Despite broad market concerns about the health of Germany’s economy following this morning’s disappointing data, the Pound (GBP) remains even less appealing than the Euro (EUR) this week.

This is because January’s UK PMIs showed Brexit uncertainties and global growth fears were having a notably negative impact on Britain’s economic outlook.

Pound (GBP) Unappealing on UK Data and Brexit Jitters

Sterling’s (GBP) downside trend has continued this week so far, following last week’s tumble. As with last week’s drop, this has been due to a combination of political and economic fears.

Concerns are rising that a no-deal Brexit is still possible, due to a lack of shift in tone from the UK government.

As hopes no-deal can be avoided caused most of last month’s Pound gains, renewed fears have caused Sterling to shed a good fraction of those gains.

On Tuesday afternoon, UK Prime Minister Theresa May indicated the government had no plans to delay the formal Brexit date from its current date of 29 March. She also said there was not enough support in Parliament for a second referendum.

These comments worsened Brexit uncertainties, exacerbating market concerns about the impact on Britain’s economy.

It comes after a hat trick of disappointing UK PMIs. Concerns that the manufacturing sector could see recession and the services sector was essentially stagnant worsened as businesses become increasingly uncertain and concerned about how Brexit will unfold.

Euro (EUR) Exchange Rates Slip from Highs as German Recession Fears Grow

Despite some economists arguing that Germany will avoid recession, concerns about the German economy continued to worsen today as investors digested the nation’s latest factory orders stats.

German factory orders were forecast to rise to 0.3% month-on-month in December, but the figure unexpectedly slumped to a disappointing contraction of -1.6%. The previous figure was revised higher though, from -1.0% to -0.2%.

Germany’s January construction PMI disappointed investors too, coming in at a nearly stagnant 50.7.

The stats followed a week of weaker-than-expected German data, which have all served to worsen concerns about how long the German economic slowdown will last and whether it could lead to a recession.

According to analysts from Deutsche Bank, reacting to the report:

‘The start of the German economy into 2019 has been a major disappointment so far.

The development of several key cyclical indicators is telling us that the German economy is drifting towards recession right now.’

German economic jitters caused the Euro (EUR) to slump today, though the weak Pound’s recovery was limited.

Pound to Euro (GBP/EUR) Exchange Rate Traders Await Further German Data

With fears about Germany’s economy increasingly in focus for Euro (EUR) investors, the German data due for publication before the end of the week has the potential to be particularly influential.

In particular, Thursday’s German industrial production report from December, and Friday’s German trade balance stats from December, will be influential if they surprise investors.

If the data comes in above expectations, fears about Germany’s economy may lessen somewhat.

However, as most recent German data has fallen short of forecasts, a continuation of this trend would lead to further Euro weakness.

The Pound (GBP) is likely to remain unappealing on Brexit uncertainties unless there are any surprising developments in the coming days.

The Bank of England (BoE) is not expected to change its tone during the Thursday policy decision, so the Pound to Euro (GBP/EUR) exchange rate is most likely to be influenced by Brexit news and German data.

Josh Jeffery

Contact Josh Jeffery