Pound to Euro (GBP/EUR) Exchange Rate Rises as German Factory Orders Continue to Plummet

GBP/EUR Exchange Rate Edges Higher Despite Hopes of Post-Covid-19 Rebound for German Economy

The Pound to Euro (GBP/EUR) exchange rate rose by 0.4% today, with the pairing currently trading around €1.11.

The Euro (EUR) fell against Sterling today following worse-than-expected German factory orders for April, which fell from -15% to -25.8%. As a result, single currency traders have become increasingly worried about Eurozone’s largest economy’s recovery in the months ahead.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, commented on the data, saying it was ‘very grim, but also very odd news.’ He added:

‘It makes little sense to dwell on the horror show of these data, except to note that they’re almost surely the bottom, at least in terms of the sequential monthly numbers.’

‘High-frequency data – such as OpenTable reservations, Apple mobility data and the MAUT – are all rebounding significantly, and quicker than in the rest of the eurozone, indicating that the post-Covid-19 rebound in Germany is progressing leaps and bounds, for now at least.’

Meanwhile, the Euro (EUR) has continued o benefit from yesterday’s news that the European Central Bank is ready to inject an additional €600 billion into the Eurozone economy.

However, Christine Lagarde, the president of the ECB, warned that the bloc was undergoing an ‘unprecedented contraction’ due to Covid-19 and lockdown measures. Nevertheless, single currency traders appear to be more hopeful that the Eurozone’s economy could make a swift recovery.

Pound (GBP) Rises Despite UK Consumer Confidence Falls to Lowest Levels Since Financial Crisis

The Pound (GBP) rose today despite last night’s release of the UK’s flash GfK consumer confidence report for May. Consumer morale fell fell to -36 – its lowest levels since the financial crisis. As a result, Sterling suffered amid growing worries over a surge in unemployment and falling house prices.

Michael Hewson, chief market analyst at CMC Markets UK, commented on survey:

‘With certain sections of the US economy slowly reopening, there is a hope that we could start to see the unemployment rate start to plateau as more and more people return to work after being furloughed.’

Today saw the release of the UK’s Halifax house prices figures for May fall to a worse-than-expected 2.6%.

Russell Galley, Halifax’s managing director, was more optimistic, however, saying:

‘Looking ahead, we expect market activity to increase progressively as restrictions are eased further across the whole of the UK and we continue to have confidence in the underlying health of the housing market over the long term.’

The GBP/EUR exchange rate will likely remain subdued throughout today’s session. However, any signs that UK-EU post-Brexit trade talks deteriorating or coming to another deadlock would prove Pound-negative.

GBP/EUR Forecast: Could Falling German Industrial Data Weigh on the Single Currency?

Euro (EUR) investors will be looking ahead to Monday’s release of Germany’s industrial production report for April. Any further signs of a setback for the Eurozone’s largest economy would prove EUR-negative.

Meanwhile, Sterling traders will be awaiting Monday’s release of May’s BRC like-for-like retail sales report. However, if UK retail sales continue to fall, we could see the Sterling continue to fall against the single currency.

The GBP/EUR exchange rate will remain subdued next week as Pound (GBP) investors grow evermore concerned for the British economy.

Post-Brexit discussions will also dominate headlines next week. Any signs of the UK backing out of an extension to the transition period proving GBP-negative.

David Moore

Contact David Moore