German Industrial Production Disappoints – EUR Exchange Rates Encumbered
The Euro Pound (EUR/GBP) exchange rate traded sideways on Friday morning, limited by market caution ahead of the US labour market readings and stifled slightly by poor private sector stats from Germany.
According to the Federal Statistics Office, Germany’s industrial production fell from 5.5% to 2.6% year-on-year in February – the steepest fall since August 2015.
Beyond this, the falls were rather wide-ranging, with capital goods, consumer goods, intermediate goods and construction all seeing significant declines.
This underlined concerns that Germany’s overall economy could take a hit in the first quarter of 2018.
Indeed, Claus Vistesen, Chief Eurozone Economist at Pantheon macroeconomics described the number as ‘grim’, whilst Ralph Solveen, Economist at Commerzbank pointed out that it might knock German GDP to 0.5% in Q1 2018.
This news reduced demand for the single currency, but ultimately kept EUR/GBP trading within a narrow band ahead of the US employment figures.
UK Productivity Increases – Pound (GBP) Exchange Rates Find Support
UK productivity increased in the fourth quarter of 2017, with the Office for National Statistics (ONS) reporting growth of 0.7%, slightly below the forecast of 0.8% but growth nonetheless.
This reading is also slightly higher than the average quarterly rate in the decade prior up to the 2008 economic downturn, which soon resulted in a period of sustained stagnation colloquially called the ‘productivity puzzle’.
Ultimately this news bodes extremely well for the UK’s economy, and could help push the Bank of England (BoE) even closer to a rate hike in May (as markets currently anticipate).
Markets will also be keeping a close eye on tonight’s comments from BoE Governor Mark Carney, with any indication of positivity or hawkish sentiment liable to give Sterling a little boost.
Trade Negotiations and the US Labour Market in Focus – What can Markets Expect for the Euro Pound (EUR/GBP) Exchange Rate?
Markets are currently stepping cautiously around all of the majors as investors prepare for the imminent release of the US labour market figures.
Analysts are currently expecting the US jobs market to report yet another month of solid growth – though perhaps less impressive than the previous month, which saw a 313k increase in jobs.
Markets predict 190k new jobs in March, a jump in wage growth and an even smaller unemployment rate at 4.0%.
If this occurs then the US Dollar could see another resurgence in demand, as the news could potentially mean that the US Federal Reserve will move for 4 rate hikes this year rather than the initially planned 3.