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EUR GBP Exchange Rate Climbs on Upbeat Eurozone Data Prints

The EUR GBP exchange rate climbed today as markets responded to a run of positive data releases from the bloc and yesterday’s news that the UK’s Office for Budget Responsibility (OBR) has downgraded its forecasts for the years ahead.

Euro (EUR) Exchange Rate climb as Eurozone Data Hits its Mark

Today’s run of data prints from the bloc were predominantly positive, with German GDP rising year-on-year in Q3 from 2.3% to 2.8% – in line with estimates.

Markit releases for Germany also proved positive, with the November flash estimate for manufacturing, services and the composite hitting 62.5, 54.9 and 57.6 respectively – all up from the October readings (manufacturing hit its highest reading since February 2011).

The Markit flash estimates for the Eurozone were similarly upbeat for November, with manufacturing printing at 60, (up from 58.5) services printing at 56.2, (up from 55) and the composite reading climbing to 57.5, (up from 56).

This encouraging raft of releases illustrated that the Eurozone’s economic recovery continues, ultimately leaving the Euro bullish despite Germany’s current issue of political uncertainty.

Carsten Brzeski, Chief Economist at ING commented on the releases:

‘The German economy is currently showing its best performance over such a long period since the mid-1990s. Even if the economy would stagnate in the final quarter of the year, GDP growth for the entire year would still come in at 2.4%; the highest reading since 2011’.

UK GDP Remains Steady, GBP Exchange Rate Reaction Muted

The Pound has moved back and forth following the release of yesterday’s UK budget and accompanying statement, initially gaining on renewed optimism and the announcement that an extra $3bn will be set aside for Brexit, but shrinking back today as markets continue to digest the OBR’s growth forecast cut.

The UK’s 2nd estimate GDP figures were also revealed today, with the year-on-year Q3 reading printing steady at 1.5% and the quarter-on-quarter reading inching up slightly from 0.3% to 0.4%.

The Office for National Statistics (ONS) reported, however, that this rise was predominantly fuelled by consumer spending, something that economists have warned will not last.

John Hawksworth, PwC Chief Economist reflected this, stating:

‘It seems consumers are still dipping further into debt to keep their spending growing by more than real disposable incomes. The rise in personal debt cannot continue forever (however), so consumer spending is likely to slow further next year’.

Beyond this, the markets seemed far more concerned with the OBR’s downgraded forecast from yesterday which put growth at 1.5% this year (rather than the 2% predicted at the March budget) and 1.4% in 2018.

This news has kept the EUR GBP exchange rate firmly in the Euro’s favour.

EUR GBP Forecast: Volatility on ECB Minutes Ahead

The Pound Euro forecast could become increasingly volatile today if the European Central Bank’s (ECB) minutes prove dovish.

The ECB has been looking to keep monetary policy on hold for some time, and another dovish set of minutes could give the Pound the chance it needs to once again take the lead.

Beyond this, however, the focus within the minutes will likely be on the Governing Council’s discussions regarding putting an end to the bank’s quantitative easing programme, something that might provide insight into the bank’s sentiment moving into 2018.