GBP/EUR Exchange Rate Slips as German 2019 GDP Growth Forecast Slashed

Pound Euro (GBP/EUR) Exchange Rate Falls despite German Growth Forecast Slashed to 0.5%

UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate fell and the pairing is currently trading at an inter-bank rate of €1.1527.

On Wednesday the German government slashed its 2019 growth forecast for the second time since January.

Back then, the government cut its growth estimate down to 1% from 1.8%.

The government is now expecting GDP growth of just 0.5%, and this reflects a worsening slowdown in the Eurozone’s largest economy.

Economy Minister Peter Altmaier said both Brexit uncertainty and the current trade disputes were weighing on the economy.

Pound Euro (GBP/EUR) Exchange Rate Slides as Brexit Causes Small Businesses ‘Headache’

UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate fell over the course of the afternoon, and the pairing is currently trading at an inter-bank rate of €1.1551.

Data revealed that vacancies at UK firms are close to a record high, as 852,000 positions are currently unfilled.

While this should help push wages higher as workers are more in demand, Federation of Small Businesses National Chairman Mike Cherry labelled this as a ‘headache’ for company owners.

Cherry places the blame on Brexit, which he claims has deterred EU nationals from seeking work in the UK.

Commenting on this, Cherry said:

‘One in five small UK employers rely on staff from the EU.

‘The sharp drop in European arrivals is a real concern for many smaller firms, particularly those in sectors such as construction, care and engineering where the contribution of EU team members is so vital. One in three small firms now say lack of access to the right personnel is a major barrier to growth.’

Pound Euro (GBP/EUR) Exchange Rate Flat as UK Economic Inactivity at Record Low

UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate remains muted, and the pairing is currently trading at an inter-bank rate of €1.1581.

Looking at the UK unemployment data in closer detail reveals that more than 75% of the 179,000 total gain in employment in the three months to February were classified as full-time employment.

Data also showed that economic inactivity fell even further in February, dropping to 20.7%.

This was the lowest since records began in 1971, however this could do little to stop Sterling from being left flat against the single currency.

Pound Euro (GBP/EUR) Exchange Rate Flat as German Economic Sentiment Improves

The Pound Sterling Euro (GBP/EUR) exchange rate slipped this morning, and the pairing is currently trading at an inter-bank rate of €1.1589.

The German ZEW economic sentiment survey showed that the mood among German investors improved for the sixth consecutive month.

April’s survey revealed that the outlook for the Eurozone’s largest economy has brightened, rising from -3.6 to 3.1.

This was the first time since March 2018 that this figure has been positive, however the GBP/EUR pairing continued to remain flat.

ZEW President Achim Wambach said the slight improvement was largely due to hope that the global economy would grow faster than previously thought, saying that Brexit had also played a part.

Wambach said:

‘The postponement of the Brexit deadline may also have contributed to buoy the economic outlook.’

Pound (GBP) Flat despite UK Employment Soaring to Record High

The UK employment rate hit a record high of 76.1% in the three months leading to February.

Unemployment remained unchanged at 3.9%, indicating that the current Brexit deadlock did not cause job losses between December and February.

However, Senior Economist at the Institute of Directors, Tej Parikh believes that Brexit uncertainty may be helping job creation.

Commenting on the data, Parikh said:

‘The elongated period of uncertainty has kept businesses in a hiring cycle. Many firms have lacked the confidence to put funding toward training, technology, and new machinery, which has in turn meant firms need to hire more workers to lift output.

‘Without a pick-up in investment, low productivity will also keep wages from growing further, particularly when considering the higher regulatory costs businesses are facing this tax year.’

Sterling (GBP) Muted as UK Real Pay Rises by the Fastest Rate since Summer 2016

Data also showed that average UK wages excluding bonuses rose by 3.4%, while last month’s figure was revised upwardly to 3.5%.

Adjusted for inflation, data shows that real pay is rising at around 1.5% a year, the fastest increase since summer 2016.

Total pay continues to rise at its fastest rate in a decade, as pay including bonuses rose by an annual rate of 3.5%, unchanged from the previous month.

This was the largest jump since the financial crisis in 2008.

Pound Euro Outlook: Will the GBP/EUR Exchange Rate Rise on Disappointing Eurozone CPI?

Looking ahead to Wednesday the Pound (GBP) could rise against the Euro (EUR) following the release of the UK Consumer Price Index (CPI).

If the UK’s annual CPI rises by 2% or more in March, inflation would meet the Bank of England’s (BoE) 2% target, which is likely to buoy Sterling.

Meanwhile, the single currency could fall further against Sterling following the release of the Eurozone CPI.

If the annual CPI rises by less than 2%, this will be the fifth consecutive month the bloc misses the European Central Bank’s 2% target, which could cause the Pound Euro (GBP/EUR) exchange rate to rise.

Millie Empson

Contact Millie Empson