German Manufacturing Hits 11-Year Low, Sending the Pound Euro (GBP/EUR) Exchange Rate Higher

Pound Sterling Euro (GBP/EUR) Exchange Rate Rises as German Manufacturing Output Falls at Steepest Rate in Over a Decade

The Pound Sterling Euro (GBP/EUR) exchange rate edged up by around 0.3% this morning, leaving the pairing trading at around €1.1284.

The Euro was left under pressure on Wednesday as traders continued to flock back to the safety of the US Dollar (USD). Many fear markets are headed for the worst economic slumps in decades as the world attempts to fight the coronavirus pandemic.

Meanwhile, data this morning revealed that German manufacturing output fell at the fastest rate in close to 11 years thanks to the coronavirus pandemic.

March’s PMI data showed slumps in output and new export orders while disruption to supply chains worsened and business confidence collapsed.

Germany’s manufacturing PMI slipped from February’s 13-month high of 48 to 45.4, sending the single currency lower.

Commenting on this, Principal Economist at IHS Markit, Phil Smith noted:

‘Manufacturing production in Germany took a considerable hit in March, falling to the greatest extent for nearly 11 years. Furthermore, there’s scope for the numbers to get even worse before they get better, as most containment measures and factory shutdowns happened either during or after the survey data were collected [12-24 March].

‘When trying to gauge the severity of the impact of the COVID-19 crisis on manufacturing, it’s important at the moment not to read too much into the headline PMI, which is still being supported by rapidly increasing supplier delivery times.’

Pound (GBP) Edges Higher despite UK Manufacturing ‘Knocked Sideways’

Sterling was able to edge higher against the Euro despite data revealing that UK manufacturing output and new orders slumped at the fastest rates since mid-2012.

Markit showed the final March PMI reading fell to 47.8, from the earlier flash reading of 48. The data also revealed business optimism slumped to a series low while the supply chain disruption intensified.

Commenting on this morning’s data release, Duncan  Brock,  Group  Director  at  the  Chartered  Institute  of  Procurement & Supply said:

‘The manufacturing sector was knocked sideways by the impact of COVID-19 and into contraction territory, experiencing some of the most challenging trading conditions since PMI records began.

‘With supplier delivery times at their worst for 28 years these fast-moving challenges affected every link in manufacturing supply chains and on an unprecedented scale. Inevitably, job creation suffered as a result as employment was reduced at the fastest pace since 2009.

‘With supply chains crumbling around the world, we can only expect a worsening outlook next month as increasingly necessary lockdown measures squeeze manufacturing production. Only creative and agile thinking, new products and approaches will see the sector through the turbulence ahead.’

Euro (EUR) Slides as German Shoppers Stockpile

Meanwhile, data this morning revealed that shoppers in Germany stockpiled ahead of the anticipated lockdown measures thanks to the coronavirus pandemic.

The German Statistical Office revealed that growth was strong in food and supermarkets were the main beneficiaries.

Annual retail sales in the bloc’s largest economy jumped by a higher-than-expected 6.4%. However, with the threat of coronavirus to the Eurozone, this did little to boost the Euro.

Pound Euro Outlook: Services PMI Data in Focus

Looking ahead, the Euro (EUR) could slump against the Pound (GBP) following the release of Eurozone inflation data.

If producer prices in the bloc slump further than expected on Thursday, the single currency will slide.

Meanwhile, Friday’s market PMI surveys are likely to leave both Sterling and the Euro under pressure.

If both Germany’s and Britain’s services PMI plummets further into contraction in March, the Pound Euro (GBP/EUR) exchange rate will remain flat.

Millie Empson

Contact Millie Empson


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