Pound to Euro (GBP/EUR) Exchange Rate Rises as German Factory Orders Lose Momentum

GBP/EUR Exchange Rate Rises as German Factory Orders Spark Concerns for Eurozone Economy

The Pound to Euro (GBP/EUR) exchange rate edged higher today, with the pairing currently fluctuating around €1.121.

The Euro (EUR) struggled today after German factory orders undershot forecasts in July. Germany’s federal statistics office, Destatis, said that manufacturing orders had risen by 2.8% following a revised 28.8% expansion in June.

However, new orders in July were 8.2% lower, seasonally and calendar-adjusted terms, than in February, the month before Covid-19 lockdown restrictions in Germany.

Jens-Oliver Niklasch, an economist at Landesbank Baden-Wuerttemberg, commented on the data:

‘In the coming months we will probably see that the low-hanging fruit has been harvested, and now the economic race to catch up will lose momentum.’

‘We will not see the pre-crisis levels quite as quickly as some had hoped.’

Today will also see a speech from the European Central Bank’s (ECB) Philip Lane, a member of the bank’s Executive Board. Any dovishness about the Eurozone’s economy, however, would further weaken the single currency.

Pound (GBP) Edges Higher as UK Health Secretary Confident of Avoiding Covid-19 Resurgence

The Pound (GBP) benefited from UK Health Secretary Matt Hancock’s optimistic assessment of the UK’s coronavirus situation. Mr Hancock hailed the mass testing programme and said that England is in a good position to avoid a Covid-19 resurgence.

Mr Hancock said:

‘In other European countries we’re seeing this big second spike. Here, the cases are broadly flat, partly because of our test-and-trace system working so effectively, partly because of the quarantine and social distancing policies.’

Meanwhile, doubts over Brexit have eased-off as investors await the next round of official UK-EU negotiators later this month.

However, following the EU’s ‘disappointment’ over the lack of progress towards a trade deal, some GBP investors remain jittery.

In UK economic news, today will see the release of August’s Construction PMI for August. If this confirms consensus and rises to 58.5, then we would see Sterling head higher.

Today will also see the Bank of England’s (BoE) MPC Michael Saunders give a speech entitled ‘The Economy and Covid-19: Looking Back and Looking Forward’. Therefore, GBP could suffer on any dovish forecasts for the British economy.

GBP/EUR Outlook: Could No-Deal Brexit Fears Drag Down Sterling Next Week?

Euro (EUR) investors will be looking ahead to Monday’s release of Germany’s industrial production data for July. Any uptick in the Eurozone’s largest economy’s industrial sector would prove EUR-positive.

GBP traders will be eyeing Monday’s release of the UK BRC Like-For-Like Retail Sales report for August. With forecasts of a 5.7% increase, we could see the GBP/EUR exchange rate edge higher.

The GBP/EUR exchange rate will remain vulnerable to Brexit developments next week. As a result, Sterling could suffer from fears of a possible no-deal Brexit on December 31st.

David Moore

Contact David Moore