Pound euro (GBP/EUR) exchange rate slips as Eurozone industry data misses forecasts
The pound euro (GBP/EUR) exchange rate is wavering this morning amid shifting Bank of England (BoE) interest rate cut bets and mixed industry data from within the Eurozone.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1658, virtually unchanged from this morning’s opening rate.
Euro (EUR) pressured by weak German factory orders
The euro (EUR) is trading without a clear direction this morning following mixed releases from the Eurozone’s largest economy.
An unexpected decline in German factory orders applied initial pressure to the common currency as the session opened, as orders fell by 0.4% in March, rather than rising by 0.5% as economists had forecast.
Carsten Brzeski, Global Head of Macro at ING, expressed concern over continual weakness within the sector, stating:
‘To some extent, industrial orders this morning illustrated the high risk that the revival of the export-oriented success formula is only short-lived. In fact, after the first post-lockdown recovery, demand for German manufacturing goods has been weak. In fact, since the start of 2022, industrial orders have dropped on average by 0.5% every month.’
However, with German exports up by 0.9%, EUR’s downside was cushioned amid signs of life elsewhere in the export-heavy economy.
In addition to this, better-than-forecast retail sales across the Eurozone are further keeping the euro afloat. Retail sales rose by 0.8% in March, surpassing market forecasts of 0.6% and notably rising from February’s 0.3% contraction.
Pound (GBP) stymied by rate cut speculations
The pound (GBP) is facing headwinds this morning amid a lack of macroeconomic releases.
With data in short supply, Sterling is left vulnerable to shifting interest rate cut speculations ahead of the Bank of England’s (BoE) upcoming interest rate decision on Thursday.
While markets widely anticipate a sixth consecutive interest rate hold, investors are eager to analyse the central bank’s forward guidance, for any signals as to when monetary loosening may occur.
Philip Shaw, Chief Economist at Investec, said:
‘This broad direction illustrates that collectively the committee is moving gradually towards a rate cut. It seems unlikely though to be ready to bite the bullet just yet and the Bank rate looks set to remain on hold at 5.25% for the sixth consecutive meeting.’
With investors and analysts currently debating whether the likelihood of a summer rate cut outweighs that of an autumn one, GBP may struggle to edge higher as the session progresses.
Pound euro exchange rate forecast: German industry data to sink EUR?
Looking ahead, the latest German industrial production data is due for release tomorrow morning. Economists forecast a contraction within the sector, with production forecast to have fallen by 1.1% in March. In the wake of today’s disappointing German factory data, further concerns about German output may see the common currency struggle against its peers.
Looking to the UK, a lack of notable data ahead of the BoE’s monetary policy meeting on Thursday could see GBP trade without a clear direction as markets continue to surmise the central bank’s current stance.