Softening UK House Price Growth Sees Pound Euro (GBP/EUR) Exchange Rate Soften
A smaller-than-expected uptick in October’s Halifax house price index limited support for the Pound Sterling to Euro (GBP/EUR) exchange rate ahead of the weekend.
While the report demonstrated that house prices had annually experienced their fastest pace of growth in more than four years it also showed that the market’s momentum has already started to falter.
With the UK economy facing greater downside pressures in the coming months, thanks to the combination of Brexit-based uncertainty and Covid-19, households look set to adopt a less optimistic outlook.
A slowdown in the housing market could expose Pound Sterling (GBP) to additional selling pressure, given the dovish message from the Bank of England’s (BoE) November policy meeting.
Higher German Industrial Production Dents GBP/EUR Exchange Rate
Although German industrial production failed to pick up as far as forecast on the month in September this still offered support to the Euro (EUR) this morning.
As production strengthened 1.6% on the month this helped to ease the latest worries over the health of the German manufacturing sector, diminishing the impact of a negative factory orders figure.
With signs pointing towards a greater degree of resilience within the Eurozone’s powerhouse economy EUR exchange rates found fresh traction, in spite of lingering lockdown concerns.
The weakening appeal of the US Dollar (USD) also offered some encouragement to the Euro, with global anxiety over the outcome of the US presidential election generally fading.
Euro Looks to Extend Gains on Widened German Trade Surplus
Confidence in the German economy could receive a fresh boost on Monday with the release of September’s set of trade data.
Forecasts point towards a sharp widening of the trade surplus, suggesting that conditions improved significantly at the end of the third quarter.
Strong growth in export volumes may see the Euro trending higher across the board next week, with a resilient German economy boding well for the health of the wider Eurozone.
On the other hand, if the surplus fails to widen as far as forecast this could limit the potential for single currency gains, limiting any GBP/EUR exchange rate losses in the near term.
Rising UK Unemployment Rate Set to Weigh on Pound Demand
Support for the Pound may prove limited, meanwhile, as markets brace for the latest set of UK labour market figures.
Markets expect to see the headline unemployment rate pick up from 4.5% to 4.7% in September, stoking fears of a building wave of job losses across the economy.
However, now that the government has pledged to extend its furlough scheme until March 2021, in the face of the fresh lockdown, this may temper any worries over the labour market outlook.
The GBP/EUR exchange rate could find traction on the back of September’s average earnings data, on the other hand, as long as wage growth shows signs of picking up.
As stronger levels of wage growth would help to encourage greater consumer spending, and limit the impact of Covid-19 concerns, a positive reading here could see the Pound pushing higher against its rival.