Pound Euro (GBP/EUR) Exchange Rate Extends Gains on Upbeat UK CBI Data

GBP/EUR Exchange Rate Continues Upwards Trend as CBI Data Buoys the Pound

(Update 16:10, 24/11/2021) The Pound Euro (GBP/EUR) exchange rate continued to climb through the afternoon as Sterling found support on better than expected industrial trends data. The Confederation of British Industry revealed a fresh order book balance of +26 for November, exceeding the forecast of +13 to reach its strongest level since the series began in 1977.

Export orders also climbed 10 points to +3, the highest level since March 2019, while the output expectations sub-index remained strong at +32, driven largely by food, drink & tobacco, electronic engineering, and chemicals sub-sectors. Manufacturers expect output growth to accelerate further in the next three months.

Capping gains slightly, stock adequacy for finished goods worsened to the weakest since records began in April 1977 amidst supply chain disruptions. The data was received positively on the whole, however: while acknowledging that supply side challenges continue to put pressure on firms’ capacity to meet demand, Anna Leach, the CBI’s deputy chief economist remarked:

‘It is promising that manufacturing total order books have improved to their strongest on record, with output growth It’s good to see strong order books and output growth in the manufacturing sector holding up as we head into winter. Output growth has been steady for three months now and remains quicker than its long-run average.’

Original article continues below:

Pound Euro Exchange Rate Supported by Weak German Data

The Pound Euro (GBP/EUR) exchange rate is rising this morning as the Euro (EUR) faces pressure from downbeat German data. The German Ifo business climate fell to 96.5 for the month of November, narrowly missing estimates.

At the time of writing, GBP/EUR is trading at €1.921, slightly above today’s opening levels.

Euro (EUR) Faces Headwinds from German Ifo Business Climate

The Euro (EUR) is falling against the majority of its peers this morning, as a variety of factors exert downside. Risk sentiment is volatile as investors await key US data this afternoon.

Adding to EUR headwinds, the German Ifo business climate revealed a drop in business morale amid concerns over supply bottlenecks, a spike in coronavirus infections, and planned price increases.

The business climate indicator was forecast to retreat from last month’s 97.7 to 96.6, but instead printed lower still at 96.5.

Not only did business sentiment fall to April lows, but the Expectations Index – indicating firms’ projections for the next six months – dropped to 94.2, reflecting renewed Covid concerns and Brexit tensions.

Euro losses may have been capped, however, by a hawkish tone from yesterday’s European Central Bank (ECB) speakers. Comments from the ECB’s Luis de Guindos and Isabel Schnabel labelled inflation as ‘structural’ and ‘risks to the upside’.

Pound (GBP) Trends in a Mixed Range Ahead of CBI Data

The Pound (GBP) is trading down against several peers this morning ahead of the UK’s industrial trends data for November. GBP faces downside from unresolved Brexit disputes and ongoing inflationary pressures.

Given a lack of UK data so far today, Sterling is trading on external factors, such as the drawn-out dispute over the Northern Ireland protocol – one of two Brexit concerns alongside UK-Franco fishing rights.

A top German diplomat has urged the UK to honour the Northern Ireland Protocol and warned that the issue is not a game, as European Commission Vice President Maros Sefcovic warns that post-Brexit talks could drag into next year.

Meanwhile, Brexit Minister Lord Frost told a conference at London’s Guildhall on Monday that fixing the Northern Ireland Protocol he negotiated last year was his top priority’.

Markets had been worried by recent threats made by the UK regarding article 16: however, international trade secretary Anne-Marie Trevelyan reassured attendees at the Margaret Thatcher Conference on Trade this week that the UK would not invoke such measures before Christmas.

GBP/EUR Exchange Rate Forecast: Pound to Face Mixed Stimuli this Afternoon?

Looking ahead, today’s data from the Confederation of British Industry is likely to lend tailwinds to the Pound Euro exchange rate, as it is expected to reveal an increase in industrial trends orders.

Subsequently however, a speech from the Bank of England (BoE)’s Silvana Tenreyro may dampen Pound sentiment, as Tenreyro is a known dove. With markets already having priced in a December interest rate rise, dovish comments would likely exert downside.

Olivia Evershed

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