Pound Euro (GBP/EUR) Exchange Rate Wobbles following Rise in German Exports
The Pound Euro (GBP/EUR) exchange rate is fluctuating this morning following mixed Eurozone data.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1067, virtually unchanged from this morning’s opening rate.
Euro (EUR) Mixed following German Trade Data
The Euro (EUR) is wavering this morning despite a better-than-expected German trade report.
A 3.7% rise in German exports throughout November significantly surpassed economist’s forecasts of 0.3%. Imports also rose by 1.9% in the same month, beating expectations of 0.2%.
As such, today’s data reports the largest surplus in German trade since January 2021, soaring to €20.4 billion. The unexpected surge in German output initially strengthened EUR sentiment this morning, as signs of a rebounding German economy buoyed the common currency.
Supporting EUR’s initial gains is the latest economic sentiment indicator. Economic optimism in the Eurozone came in stronger than forecast this morning at 96.4 in December, up from a reading of 94 in the previous month. This data serves to further quell recent economic pessimism within the Euro bloc.
In the wake of last week’s hotter-than-expected CPI data, signs of economic expansion could drive speculation that the European Central Bank (ECB) will be able to hold out until the second half of 2024 before starting to cut interest rates.
However, a 0.3% contraction in November’s retail sales data is simultaneously fuelling volatile trade for the Euro. A slump in retail activity throughout November looks to be capping the common currencies upside potential, as signs of decreased consumer spending negates EUR sentiment.
Pound (GBP) Wavers as Data Remains Sparse
The Pound (GBP) is losing ground this morning amid a lack of notable UK data.
A firmly downbeat market mood serves to further undermine GBP, as anxious investors opt for the increasingly risk-sensitive Pound’s safe-haven peers amid signs of escalating conflict in the Middle East.
Sterling may struggle to catch bids ahead of further data releases as lingering expectations of Bank of England (BoE) interest rate cuts continue to stymie investor interest.
Ian Stewart, Chief Economist at Deloitte, observes how continually falling UK inflation reinforces speculation that BoE rate cuts are on the horizon:
‘Crucially, inflation has fallen sharply since the summer, bolstering expectations of earlier interest rate reductions.’
Pound Euro Exchange Rate Forecast: Eurozone Unemployment in Focus
Tomorrow, Germany’s latest industrial production data is forecast to report a 0.6% rise throughout November. Should the data print in line with expectations, reporting an end to five consecutive months of declining output, the Pound Euro exchange rate may falter..
Also due for release is the Eurozone’s latest unemployment data. Though forecast to edge marginally higher to 6.6%, unemployment is expected to remain close to multi-year lows. Confirmation of a robust labour sector may lend the Euro some support.
Otherwise, a lack of notable UK data in the coming days may leave the Pound vulnerable to shifts in risk appetite. While this morning’s downbeat mood serves to lift the safe-haven Euro, movement towards cheery trading conditions could see the increasingly risk-sensitive Pound take precedent.