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Euro Pound (EUR/GBP) Exchange Rate Flat as German Exports Rebound

Euro Pound Sterling (EUR/GBP) Exchange Rate Muted as German Exporters Provided with Relief

The Euro Pound Sterling (EUR/GBP) exchange rate was left muted today, with the pairing currently trading at around £0.8611.

The single currency remained steady at the end of the week as German exporters reported the largest increase in exports in almost two years.

Exports rose by a better-than-expected 1.5%, which likely provided Germany with some much-needed relief amidst widespread concerns the bloc’s largest economy was headed for a recession in the third quarter.

Commenting on this morning’s German exports data, Landesbank Baden-Wuerttemberg economist, Jens-Oliver Niklasch said:

‘This looks like a revival in foreign trade but looking at the whole year, September is more of an outlier.

‘The risks in overseas trade have got smaller but have not yet disappeared.’

BoE Divide Leaves Sterling (GBP) Flat

The Pound was left flat against the single currency as investors waited for further political developments ahead of December’s snap general election.

Meanwhile, yesterday saw the Bank of England (BoE) leave interest rates unchanged in its last monetary policy meeting before the election.

While the bank left rates on hold, divisions between policymakers left GBP under pressure as two Monetary Policy Committee members voted in favour of a rate cut.

Michael Saunders and Jonathan Haskel believed that it was time to slash rates, and became the first MPC members to vote for easing since just after the 2016 Brexit referendum.

Added to this, Governor Mark Carney’s speech following the decision was overly dovish and he stated that the bank would consider a rate cut if ‘global growth fails to stabilise or if Brexit uncertainties remain entrenched’.

The dovish outcome of Thursday’s meeting failed to make a lasting impression on the Pound, and commenting on this, Commerzbank FX strategist, Thu Lan Nguyen said:

‘It just shows that the market is largely concentrated on politics at the moment, and not on fundamentals and monetary policy.’

Pound (GBP) Muted as Demand for Workers Increases at Slowest Pace in Eight Years

On Friday, data revealed that UK employers’ demand for employees rose at the slowest pace in close to eight years in October.

This weak data fits into a deteriorating economic picture, as this along with political uncertainty and slowing global growth, could push the Bank of England (BoE) towards easing.

Commenting on this, Commerzbank’s Thu Lan Nguyen noted:

‘This should at least limit the appreciation potential of the Pound over the medium to long term, but still the general direction of Pound exchange rate will be determined by the general election.’

However, some investors were turning bullish as many now believe the chance of the UK leaving the European Union with a deal at the end of January has increased.

Euro Pound Outlook: Will Flash GDP Buoy GBP?

Looking ahead to next week, the Pound (GBP) could rise against the Euro (EUR) following the release of the UK’s preliminary GDP growth data.

Sterling will rise if data reveals the economy has expanded, narrowly missing falling into contraction for the second consecutive month and escaping recession.

Meanwhile, Tuesday could see the single currency extend its losses following the release of the Eurozone’s ZEW economic sentiment index.

If ZEW reveals that sentiment has slumped further than expected into contraction in November, it is likely the Euro Pound (EUR/GBP) exchange rate will fall.