Euro Pound (EUR/GBP) Exchange Rate Trends Up as Investors Digest Mixed Data
The Euro (EUR) has risen against the Pound (GBP) this afternoon as both Europe and the UK published mixed data. Having traded level overnight, the Euro has since managed to assert itself, while GBP remains pressured by a slew of disappointing figures.
At the time of writing, EUR/GBP is trading at £0.8487, a three-day high for the Euro.
Pound (GBP) Weighed Down Despite Positive GDP
The Pound (GBP) has fallen against the majority of its peers today as a clutch of disappointing UK data overwrote this morning’s positive GDP release. GDP growth of 4.8% seemed impressive initially, but analysts were quick to suggest the rise merely represents a bounce back from the previous quarter’s 1.6% contraction, thus limiting upside potential.
James Smith from ING reports: ‘A large part of the 4.8% quarterly growth is a simple function of the reopenings. And indeed, if we look at June data specifically, 0.45% of the 1% monthly growth came from health, which is linked to people visiting their doctor more…’
Adding to poor GBP sentiment, UK industrial production contracted month-on-month by 0.7%, though it was forecast to expand by 0.3%. Business investment also fell short of predictions, printing at 2.4% rather than 10.5%; and the UK’s trade deficit widened by more than expected to £2.5bn, as exports fell 1.5%.
Coronavirus is at least partly to blame for the abundance of unmet expectations, as analysts observe: ‘the sharp rise in Covid-19 cases through July appears to have stopped the recovery in its tracks.’ As Covid cases continue to spread across parts of Asia and Australia, the threat posed to the global economy persists, inspiring a risk-off mood that does little to help the Pound.
Euro (EUR) Trends Up as Downside Pressure is Limited
The Euro has risen against the Pound this afternoon, as Sterling’s plight sent investor support the other way.
European data has been thin on the ground today, with industrial production figures standing out as the main indicator of Euro performance. June’s figures showed a 0.2% contraction on account of a decrease in the production of capital goods and energy: while disappointing, however, the data didn’t seem to weigh too heavily on the single currency.
It may be that EUR traders remained buoyed by Germany’s inflation data published the day previous. The consumer price inflation rate in Germany was confirmed at 3.8% year-on-year in July 2021, the highest level since December 1993.
Outside factors may also be boosting the Euro. Slow to start, the bloc is now vaccinating at twice the rate of US or UK, with Spain, Portugal and Denmark already having overtaken most other countries. As free Covid tests are withdrawn, Covid pass requirements enforced and vaccinations mandated for health and social care workers, the uptake rate has increased considerably.
Euro Pound Exchange Rate Forecast: Euro to Rise Further on Tomorrow’s Data?
Looking to tomorrow, the Euro may climb higher still against the Pound as low-impact data suggests progress in the Eurozone economy.
The Euro area balance of trade is looking to print with a substantial surplus, while wholesale prices are expected to have increased. Meanwhile, a lack of UK data could leave GBP vulnerable to losses.