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Euro Pound (EUR/GBP) Exchange Rate Sinks as Global Trade Tensions Rise

Pound to Euro Exchange Rate bank notes

EUR/GBP Exchange Rate Falls on Concerns of Weakening German Economy

The Euro Pound (EUR/GBP) exchange rate fell by 0.6% today, leaving the pairing trading around €1.087 on the interbank market.

Today saw the Euro (EUR) fall on heightened fears over global trade, as the US and China erupted in a trade war following Beijing’s limiting of the Chinese Yuan in what has been interpreted as a direct retaliation against US tariffs on Chinese goods.

Art Hogan, a Chief Market Strategist at National Securities Corporation, commented:

‘Historically, recessions occur in reaction to a monetary policy mistake. This is the first time we may have to deal with a trade policy miscalculation.’

The Euro fell despite publication of the German factory orders for June, which rose from -2.0% to 2.5%.

Non-seasonally adjusted figures also improved, rising from -8.4% to -3.6%.

However, Euro traders became increasingly concerned that Germany’s decline in domestic orders could indicate a possible recession in the Eurozone’s largest economy.

Sebastian Dulllien, an Economist at Macroeconomics, also warned:

‘The German economy is currently hanging by a thread.’

GBP/EUR Exchange Rate Edges Higher Despite No-Deal Brexit Woes

The Pound rose against the Euro today as ongoing global trade developments eclipsed Brexit uncertainty, following comments former Environment Secretary Michael Gove who said that he regrets the EU’s rejection of further negotiations on the withdrawal agreement.

Mr Gove said:

‘At the moment, it’s the EU that seems to be saying they’re not interested, they are simply saying ‘no, we don’t want to talk’. I think that’s wrong and sad, it’s not in Europe’s interests.’

Today saw the release of the BRC Like-For-Like Retail Sales figures for July, which confirmed consensus and rose from -1.6% to 0.1% – their weakest growth in July on record.

Esme Harwood, a Director at Barclaycard, said:

‘Underlying uncertainty about the wider economic and political landscape (is) causing many to hold off making purchases on bigger-ticket items.’

The Pound’s gains, however, are expected to be short-lived as no-deal Brexit fears are likely to prevent Sterling holding on today’s gains.

EUR/GBP Outlook: German Industrial Production in Focus

Euro traders will be looking ahead to tomorrow’s publication of the German industrial production figures for June, which are expected to fall from 0.3% to -0.4%.

As a result, we could see the Euro continue to fall as fears rise over the health of the Eurozone’s largest economy.

Meanwhile, Sterling traders will be paying close attention to Brexit developments this week, and with any further indications of a breakdown between the UK and the EU over the withdrawal agreement, we could see the Pound fall against the Euro.