Pound to Euro (GBP/EUR) Exchange Rate Edges Higher as German Exports Recover in May

GBP/EUR Exchange Rate Rises on the European Commission’s Dovish Outlook for Eurozone Economy

The Pound to Euro (GBP/EUR) exchange rate rose by around 0.2% today, with the pairing currently trading around €1.11.

The Euro (EUR) failed to gain against Sterling today despite German exports rising from -24% to 9% in May. However, with a long way to go until the Eurozone’s powerhouse economy to fully recovery, single currency traders have remained cautious.

Carsten Brzeski, a senior analyst at ING, commented on the data:

‘Looking ahead, while April was the worst month ever in terms of most economic data releases, the month of May has been one of the best months ever.’

‘However, it will need a couple of these ‘best month evers’ to bring the economy back to its pre-crisis level. Particularly the divergence between domestic and external demand is remarkable.’

Yesterday also saw reports that the Eurozone could be headed for a recession that could be deeper than forecast by the European Commission (EC). According to the EC, the bloc could contract by 8.7% this year, while growing 6.1% in 2021.

Consequently, the EUR has struggled against the Pound (GBP) as uncertainty remains over the Eurozone’s economic recovery in the months ahead.

Pound (GBP) Rises Despite Chancellor’s Warning of ‘Difficult Times Ahead’ for British Economy

The Pound (GBP) edged higher against the Euro (EUR) today despite UK Chancellor Rishi Sunak’s warning that there are ‘difficult times ahead’ for the British economy.

Mr Sunak told BBC Radio 4’s Today Programme:

‘Throughout this crisis I’ve had decisions to make and whether to act in a broad way at scale and at speed or to act in a more targeted and nuanced way.’

‘The problem is the severity of what was happening to our economy, the scale of what was happening, and indeed the speed that it was happening at demanded a different response.’

Following yesterday’s Summer Statement, however, GBP investors have become more optimistic about the British economy’s recovery.

Petr Krpata, IR Strategist at ING Bank, was more sceptical, however:

‘While the size of the stimulus announced is modestly larger than expected, in our view it is not significant enough to prompt further GBP gains. The announced measures today do not significantly alter our UK growth outlook, and with the overriding GBP driver (UK-EU trade negotiations) still looking fairly uncertain, more gains in GBP are unlikely.’

Meanwhile, post-Brexit discussions between the UK and EU remain in focus this week. Any signs of a breakthrough over fisheries or other complications to the trade deal, then we could see GBP rise.

GBP/EUR Outlook: Could Rising French Industrial Output Buoy the Single Currency?

Euro (EUR) investors will be looking head to tomorrow’s release of the French Industrial Output figures for May. If these confirm forecasts and rise from -20.1% to 15.1%, then we could see the EUR/GBP exchange rate head higher.

Sterling traders will be paying close attention to the British economy. Any signs of improvement in consumer confidence following Mr Sunak’s Summer Statement on Wednesday could boost the Pound.

The GBP/EUR exchange rate will also be driven by Brexit developments. If the UK and the EU compromise on a possible trade deal, the pairing could begin to edge higher.

David Moore

Contact David Moore