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Euro Pound (EUR/GBP) Exchange Rate Skyrockets Following Shock Contraction in UK Industrial Production

EUR/GBP Exchange Rate Falters as UK Production Figures Disappoint

The Euro Pound (EUR/GBP) exchange rate is off to a solid start this week as the pairing was sent spiralling higher by some disappointing UK economic data.

At the time of writing, the EUR/GBP exchange rate is currently up by around 0.4%, with the pairing just breaking past the £0.88 barrier.

Pound Sterling (GBP) Exchange Rate Plummets as Factory Production Slumps

The Pound (GBP) is plunging at the start of this week’s session as GBP investors reeled following the release of some lacklustre UK data.

According to figures published by the Office for National Statistics (ONS), the UK’s trade deficit unexpectedly swelled from -£3.22bn to -£5.28bn in April, disappointing investors who had hoped the trade deficit would narrow to -£2.5bn.

However it was the accompanying industrial production figures that were likely the most damaging for Sterling this morning as the ONS reported factory output growth slumped from 0.1% to -0.8% over the same period.

This was well behind forecasts of the modest 0.2% rise in growth that had been forecast and was also saw the first contraction in production in 2018.

Rob Kent-Smith, Head of National Accounts at ONS said:

‘Manufacturing fell in the three months to April with electrical machinery and steel for infrastructure projects seeing reduced production. International demand continued to slow and the domestic market remained subdued.

However, oil and gas production grew strongly in the aftermath of the Forties pipeline closure at the end of last year.’

Euro (EUR) Exchange Rate Lifted as Italy’s New Economy Minister Vows to Stick with the Single Currency

At the same time, helping to extend the gains in the Euro Pound (EUR/GBP) exchange rate this morning are comments from Italy’s new economy minister, Giovanni Tria, in which he ruled out leaving the Euro.

Speaking to Italian newspaper Corriere della Sera, Tria said:

‘The position of the executive is clear and unanimous. There isn’t any discussion on a plan to leave the Euro, the government is determined, in any event, to prevent market conditions which push towards the exit to be materialized.’

His comments will come as a major relief to EUR investors who have been skittish in recent weeks that Italy’s new ruling coalition government could seek to return to the Lira given the administration’s anti-EU leanings.

The government had previously appointed Euroskeptic economist, Paolo Savona for the role of economy minister, but was vetoed by Italian President, Sergio Mattarella.

EUR/GBP Exchange Rate Forecast: Euro to Surge as ECB Plans to Wind Down QE Programme?

Looking ahead, it’s set to be a busy session for the EUR/GBP exchange rate this week, with the Euro (EUR) in particular likely to see some significant movement on the back of the European Central Bank’s (ECB) latest policy meeting.

While the ECB is not expected to make any changes to monetary policy at this week’s meeting, there have been hints that policymakers may begin discussing a timetable for the winding down of its stimulus programme.

This is likely to prompt a surge in the Euro exchange rate as the ECB takes its first steps towards normalising its monetary policy.

At the same time the Pound is also likely to see some notable movement throughout this week’s session as well, with the UK’s latest inflation and wage figures likely to be watched for any indications the Bank of England (BoE) could still raise interest rates this year.