Homepage » News » EUR/GBP » Eurozone Industrial Production Sends the Euro Pound (EUR/GBP) Exchange Rate Lower

Eurozone Industrial Production Sends the Euro Pound (EUR/GBP) Exchange Rate Lower

Euro Pound Sterling (EUR/GBP) Exchange Rate Tumbles on as Bloc’s Production Suffers Record Fall

UPDATE: The Euro Pound Sterling (EUR/GBP) exchange rate continued to fall, leaving the pairing trading at around £0.8826.

The single currency continued to suffer losses against the Pound after data revealed industrial production in the bloc tumbled.

Eurozone industrial production slumped by -11.3% in March, the largest monthly decline on record.

Coronavirus lockdown measures across the bloc severely impacted industrial activity across the bloc, which weighed on EUR.

Added to this, markets expect April’s data to be even worse. Commenting on this, Eurozone Senior Economist at ING, Bert Colijn wrote:

‘Looking ahead, things will get worse before they get better, as the lockdown was in place or the full month of April as opposed to roughly two weeks in March. From there on, there will be significant recovery as the reopening of plants will surely increase production from the very low April bottom.’

Euro Pound Sterling (EUR/GBP) Exchange Rate Falls despite UK Suffering Largest GDP Slump Since 2008

The Euro Pound Sterling (EUR/GBP) exchange rate slumped by around -0.3%, leaving the pairing trading at around £0.8827.

The Pound was able to make gains against the single currency despite this morning’s data revealing the UK’s economy shrank by -5.8%.

However, Sterling was buoyed after the British government extended its furlough scheme until the end of October.

Meanwhile, this morning’s official data showed Britain’s economy shrank by a record amount in March as the coronavirus pandemic hit the country.

In the first three months of 2020, GDP contracted by -2% compared to the last three months of 2019. This was the largest quarter-on-quarter slump since the end of 2008.

Added to this, analysts expect a larger fall in April as the entire month was spent under lockdown by consumers and companies.

Commenting on this morning’s GDP data, head of economics at the British Chambers of Commerce, Suren Thiru noted:

‘The speed and scale at which coronavirus has hit the UK economy is unprecedented and means that the Q1 decline is likely to be followed by a further, more historically significant, contraction in economic activity in Q2.’

Meanwhile, last week the Bank of England (BoE) warned the economy was headed for the sharpest annual fall in more than 300 years. Policymakers said a fall of -14% was possible, and according to Capital Economics’ economist, Ruth Gregory:

‘Given that the economy was growing a quarterly rate of about 0.1% before the lockdown, today’s release therefore implies that economic activity after the lockdown was imposed on March 23 was down a whopping 21%.’

Euro (EUR) Slides as Bloc Remains Divided on Coronavirus Crisis

Meanwhile, the single currency edged lower as the Eurozone remains divided on how to deal with the coronavirus crisis.

Leaders of the bloc continue to differ on how to jointly contribute to a coronavirus rescue package for struggling economies such as Italy.

Analysts remain bearish on the single currency due to the lack of cohesive fiscal policy.

The Euro has been the worst G-10 performer since the coronavirus crisis hit markets in March.

Commenting on this, head of corporate foreign exchange at Investec’s Treasury Risk Solutions, Jonathan Pryor said:

‘It’s not just COVID – I don’t think markets have taken any comfort from what it’s done to the European Union. That’s putting another question mark on the medium to long-term value of the Euro.’

Euro Pound Outlook: ECB and Inflation in Focus

Looking ahead, the Euro (EUR) could suffer further losses against the Pound (GBP) following speeches from European Central Bank (ECB) policymakers.

If ECB Chief Economist, Philip Lane is overly dovish about the outlook for the bloc, the Euro could slide further.

Meanwhile, on Thursday the single currency could suffer further losses following the release of Germany’s inflation data.

If April’s harmonised inflation rate continues to fall further below the ECB’s target, the Euro Pound (EUR/GBP) exchange rate will slide.