Pound Sterling Euro (GBP/EUR) Exchange Rate Falls as Germany Announces Coronavirus Stimulus Package
The Pound Sterling Euro (GBP/EUR) exchange rate slumped, leaving the pairing trading at around €1.1534.
The single currency edged up on Monday after data revealed the German industrial sector showed some sign of life at the start of 2020.
Industrial production rose by 3% in January, while December’s figure was upwardly revised to a slightly smaller slump of -2.2%.
While the industrial sector saw a sharp rebound in activity, further data revealed German exports stagnated in the first month of 2020.
The trade surplus in the bloc’s largest economy fell to €13.9 billion, the lowest in three years.
Meanwhile, Germany’s government decided on the first package to tackle the expected economic hit caused by the spread of coronavirus.
Commenting on the government’s package, ING’s Chief Economist, Eurozone and Global Head of Macro, Carsten Brzeski noted:
‘In our view, the German government’s package is a good step in the right direction, but it will only tackle the impact from a short-lived economic shock. If Covid-19 spreads further and the economic impact worsens, last night’s move will not have been the final word.’
Coronavirus Panic Sends Investors Flocking to Safe Haven Currencies
Increased panic over the spread of coronavirus has weighed on markets at the start of the week.
Ratings agency, Moody’s has warned of the risk of global recession due to the spread of Covid-19.
The number of coronavirus cases worldwide rose beyond 110,000 cases and spread to further countries. The global death toll neared 4,000, and the third death in the UK due to the virus was reported last night.
This caused investors to flock to safe-haven currencies, and Saudi Arabia’s decision to boost oil production causing prices to collapse sent the Euro around 1% higher.
After Saudi Arabia’s decision, oil prices slumped by around 30%, weighing on oil-sensitive currencies and supporting the Euro.
Commenting on the slump in the stock market, Markets.com’s Neil Wilson wrote:
‘This will be remembered as Black Monday. If you thought it couldn’t get any worse than the last fortnight, think again. The blood really is running in the streets, it’s utter carnage out there.’
German bank Berenberg has predicted that Covid-19 could cause a significant downturn in both Italy and Germany.
Pound Euro Outlook: Will Sterling Rebound?
Looking ahead, the Pound (GBP) could receive some support and rise against the Euro (EUR) following the release of like-for-like retail sales.
If the BRC’s like-for-like sales rise higher than expected in February, rebounding from January’s stagnation, Sterling will rise.
Meanwhile, the single currency could slide following the release of the bloc’s third estimate of Q4 GDP.
Disappointing Eurozone growth will send the Pound Euro (GBP/EUR) exchange rate higher.