Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as German Factories Rebound Before Covid-19 Outbreak
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat, leaving the pairing trading at around €1.1515.
The single currency remained flat on Friday despite data showing that German factories rebounded. However, this was before China was hit by the Covid-19 outbreak.
Orders jumped by a five-year high of 5.5%, highlighting that manufacturers were beginning to recover from a slump that has engulfed the bloc’s largest economy for more than a year.
However, Euro gains were limited as many companies reported disruptions to supply chains and weaker export demand as the coronavirus spreads.
Added to this, Germany’s Economy Ministry said that the results reflected bulk orders and catch-up effects after the Christmas holidays.
While businesses confidence stabilised, the Ministry noted that ‘manufacturing should have reached a turning point. Yet the impact from the new coronavirus risks remains to be seen.’
With the spread of Covid-19 pushing many central banks, including the Federal Reserve to slash rates, many expect the European Central Bank (ECB) will soon follow suit.
However, with the burden falling on small and medium companies, investors largely expect the ECB to make a small cut at best.
Sterling (GBP) Flat as UK Staff Demand Jumps to Six Year High
The Pound remained flat on Friday after data showed that demand for staff from British employers jumped in February.
The Recruitment and Employment Confederation’s (REC) index of demand for staff saw the largest monthly rise in more than six years.
Permanent job placements rose at the fastest rate in 14 months, while temporary staff billings fell for a second month.
This added to signs that the British economy was continuing to pick up after Prime Minister Boris Johnson’s election win in December.
Commenting on this morning’s data, KPMG’s vice chair James Stewart noted:
‘Looking ahead, the current big unknown is the impact and influence the coronavirus may have on market confidence, let alone the lingering uncertainty around the actual Brexit deal.
‘Businesses will be hoping that next week’s budget provides some relief and investment to help get the UK back on a path to growth.’
Pound Euro Outlook: UK Spring Budget in Focus
Looking ahead to Monday, the Euro (EUR) could make some gains against the Pound (GBP) following the release of German statistics.
If German industrial production rises higher than expected in January, it will buoy the single currency.
Meanwhile, markets will be looking to Wednesday’s release of Chancellor Rishi Sunak’s Spring Budget.
If Sunak announces less public spending than expected, it could cause the Pound Euro (GBP/EUR) exchange rate to slide further.