Rebound in German Factory Orders Dents Pound Euro Exchange Rate
A stronger-than-expected rebound in German factory orders saw the Pound to Euro (GBP/EUR) exchange rate set on a downtrend this morning.
While forecasts had pointed towards a solid uptick on the month in January the ultimate increase of 1.4% gave investors greater cause for confidence in the health of the manufacturing sector.
This latest evidence of increased resilience within the Eurozone’s powerhouse economy offered a leg up to the Euro (EUR), even as the latest Italian retail sales data added to the currency union’s general slowdown.
If the German manufacturing sector can hold onto a positive footing over the course of the first quarter this may limit the risk of a negative gross domestic product showing, offering EUR exchange rates a boost.
An improved Spanish consumer confidence index also helped to shore up the single currency against its rivals at this stage.
Lacklustre UK House Price Growth Limits Pound Support
The mood towards Pound Sterling (GBP), meanwhile, soured in response to the Halifax house price index report.
As house prices failed to stabilise on the month, delivering another -0.1% contraction, this dented market confidence in the health of the UK housing market.
Given that the housing market has helped to shield the wider economy from some of the impact of the ongoing Covid-19 crisis over the last year this weakness left the Pound on the back foot.
After experiencing a bullish run over the course of the week the potential for a GBP exchange rate correction also weighed heavily on the minds of investors.
Solid German Industrial Production May Extend Euro Gains
Support for the Euro could pick up further on Monday on the back of January’s German industrial production figure.
Forecasts suggest another positive showing here, with growth in production picking up from 0% to 0.2% on the month.
If the data can deliver another solid upside surprise the Pound to Euro exchange rate looks set to remain under pressure at the start of the new week.
On the other hand, any renewed weakness in industrial production could help to undermine confidence in the health of the Eurozone’s powerhouse economy once again.
Pound Exchange Rates to Remain Muted Ahead of January’s UK GDP Report
With UK economic data releases thin on the ground in the coming week the Pound may struggle to regain any particular traction against its rivals.
Growing anticipation ahead of Friday’s raft of UK trade and growth data could also keep GBP exchange rates biased to the downside.
As investors expect to see another negative showing from January’s gross domestic product report the Pound could find itself facing a fresh bout of selling pressure.
Unless the UK economy can demonstrate signs of resilience in the face of the ongoing national lockdown the Pound to Euro exchange rate looks set to remain on the back foot.