Reduction of German Trade Surplus Leaves EUR/GBP Exchange Rate Tight
The Euro has traded in a narrow range against the Pound (EUR/GBP) on 9th March, following disappointing economic data and news concerning trading.
On the homefront, Germany’s trade surplus has shrunk in January, from 18.1bn in December to 17.4bn at the start of 2018.
This still leaves the country with an enviably large trading surplus, but has left Euro traders wary about future falls.
More widely, the Euro has also fallen because of growing tensions about the US’s plans to impose tariffs on steel and aluminium being imported into the country.
While precise details have been difficult to pin down, it appears that while Canada and Mexico could be exempt the Eurozone may not see any such favouritism.
With talk of a ‘trade war’ or counter-tariffs increasing, Euro traders have steered clear of the single currency at present until more favourable details emerge.
Pound to Euro (GBP/EUR) Exchange Rate Stable after Contrasting UK Production Data
The Pound to Euro exchange rate (GBP/EUR) has remained close to opening levels on 9th March, following the release of a range of UK production data.
The mix of positive and negative results has led to the Pound remaining steady against the Euro, with GBP traders showing clear uncertainty at present.
Levels of construction output have fallen in January, but annual industrial and manufacturing production levels have conversely risen.
While these latter two results could be considered supportive, a widening of the current UK trade deficit to -3.074bn has prevented an outright Pound advance.
Euro to Pound Weekly Exchange Rate Forecast: EUR/GBP could Decline on Slowing Eurozone Inflation
The Euro to Pound exchange rate (EUR/GB) could slide in the week ahead, assuming that high-impact Eurozone inflation rate data prints as expected.
The main data releases to watch out for will be German inflation rate figures on 14th March, as well as Eurozone-wide inflation stats on 16th March.
The German inflation rate reading will be the finalised figure for February, which is tipped to show a year-on-year slowdown from 1.6% to 1.4%.
As Germany is the largest single economy in the Eurozone, such a slowdown may mean that the overall Eurozone reading is affected.
With that in mind, the finalised annual Eurozone figure for February is predicted to be downgraded from 1.3% to 1.2%.
Inflation is a key factor for the European Central Bank (ECB) when it adjusts monetary policy – if inflation is slowing then the ECB will be less inclined to act.
Some economists predict little activity from the ECB in 2018, but slowing inflation could still trigger a EUR/GBP exchange rate drop.
On the other side of the pairing, the Pound could be strongly influenced by Tuesday’s Spring Budget announcement, delivered by Chancellor Philip Hammond.
Although the Spring Budget is considered less important than the Autumn Statement, Mr Hammond’s plans could still trigger GBP/EUR fluctuations.
Away from immediate analysis, the budget could continue to affect the Pound after it is delivered, given the limited UK data out before the weekend.
Both Conservative Party members and opponents have called for emergency NHS spending, although it is unclear if Mr Hammond will respond to these pleas.
If the Spring Budget seems light on details and not adequate for current conditions, the Pound to Euro exchange rate (GBP/EUR) could decline moderately.