Pound Euro (GBP/EUR) exchange rate unclear as German exports sink

Pound Euro (GBP/EUR) exchange rate fluctuates amid falling German output

The Pound Euro (GBP/EUR) exchange rate is quiet this morning following a contraction in German exports throughout December.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1704, virtually unchanged from this morning’s opening rate.

Euro (EUR) stumbles on weak German export data

The Euro (EUR) is facing pressure this morning, following disappointing German trade data.

With exports falling 4.7% month-on-month in December, the industry-heavy German economy showed significant signs of weakness today, reinforcing corners that Germany remains the ‘sick man of Europe’.

While analysts had predicted only a 2% slump, exports saw the largest decline since March 2022, serving to undermine EUR.

Destatis, German Federal Statistics Office, reports:

‘Most German exports went to the United States in December 2023. After calendar and seasonally adjusted adjustments, 5.5% fewer goods were exported there than in November 2023. This means that exports to the United States fell to a value of 12.7 billion euros.’

As the world’s third largest exporter, waning international demand could seriously harm the German economy, should downward growth continue.

Similarly, a 6.7% decline in imports in Germany also points to slowing domestic demand within the Eurozone’s largest economy.

Pound (GBP) wavers amid growing BoE rate cut bets

The Pound (GBP) is on the defensive this morning amid a lack of fresh economic data.

In the wake of last week’s dovish hold on UK interest rates, economists have argued that summer rate cuts are necessary in order for the UK to reach its GDP growth projections in the coming months. Falling interest rates would inject a renewed sense of momentum into the British economy, enabling the 0.3% growth target set for 2024.

Christopher Siepmann, a senior economist at Generali Asset Management, observed persistently high interest rates could negatively impact the trajectory of the UK economy.

‘This is largely caused by assuming key rates cuts in line with current market expectations to 4.2 per cent by end 2024 and 3.4 per cent by end 2025. In the alternative scenario, in which the Bank of England keeps its current policy stance of 5.25 per cent, the UK would remain in recession throughout the forecast horizon.’

Pound Euro exchange rate forecast: Eurozone to see another fall in retail activity?

Coming up, the Eurozone’s latest retail sales data is due for release tomorrow. Economists expect to see a larger contraction of 1% in December’s figures, in comparison with the previous month’s 0.3% decline. Should the data print as expected, EUR may falter amid signs of a worsening retail sector.

Also due for release on Tuesday is Germany’s latest manufacturing data. German factory orders are set to come in flat, reporting 0% growth month-on-month. Stagnancy in the industry-heavy German economy may see the Euro face headwinds.

A data light week in the UK may see Sterling falter, as developing conflict in the Middle East threatens to impose supply chain shocks. Spooked global markets will likely see investors opt for safe-haven currencies in place of the increasingly risk-sensitive Pound in this instance. However, cheery trade could serve to lend GBP some support against its more reliable peers.

Yasmine Arasteh

Contact Yasmine Arasteh

Do Not Sell My Personal Information