The Euro has advanced against a weaker Pound today, hitting the best exchange rate since June 28th. This comes after a spread of UK data covering trade and production proved largely disappointing.
- EUR GBP rate rises to 0.8843 – GBP EUR rate slides to 1.1307
- Euro advances on rising industrial data – German production beats forecasts
- Pound slumps on widening trade deficit – Contracting production drags GBP down
- G20 meetings may prove impactful – Major UK wage data out next week
The Euro has climbed by 0.4% against Sterling, thanks both to poor UK news and supportive Eurozone ecostats.
Euro Climbs after Strong Postings for Eurozone Production
The latest Euro advance comes after a pair of positive data releases out of the two largest Eurozone economies.
In the first case, Germany has seen its industrial production level rise from 0.7% to 1.2% in May, when forecasts had been for a 0.3% result.
Additionally, France has seen a jump from -0.6% to 1.9% for its industrial production, as well as a reduction of the May trade deficit.
Pound Tumbles after Production Falls and Trade Deficit Widens
Ahead of the weekend, the Pound has been dealt a twofold blow by UK domestic data. In the first case, the trade deficit has expanded in May, from -2.12bn to -3.07bn.
Further dragging the Pound down against the Euro has been the spread of construction, industrial and manufacturing figures for May. These have generally posted negatively or not risen by as much as forecast.
Summing up the results has been Office of National Statistics Senior Statistician Kate Davies;
‘Activity in the production sector was broadly unchanged in May, though the underlying position is weaker with both total output and manufacturing falling in the three months to May compared with the previous three months.
Construction output also fell on a three-monthly basis, though this is after several years of growth. Meanwhile, the total trade deficit widened by £2 billion in the most recent three months, primarily due to high imports especially from outside the European Union’.
Looking ahead to possible improvements in the future, Ruth Gregory of Capital Economics has stated;
‘The weakness in the production sector has reflected the volatile pharmaceuticals sector as well as the effect of May’s warm weather weighing on utility output, so we may see some reversal of the recent weakness in the coming months’.
EUR GBP Weekly Forecast: G20 Talks and UK Earnings in Focus
In the near-term, the Euro could be influenced by any major news out of today and Saturday’s G20 summit.
The gathering of 20 world leaders is expected to see the spotlight turn on Donald Trump, who could announce his plans for the future US-EU relationship.
If Trump looks like he is reigning back his protectionist stance then the Euro could appreciate, while divisive and extreme comments could trigger a EUR GBP crash if traders panic.
Trade data will be the main Eurozone news next week, consisting of German balance stats on Monday and Eurozone figures on Friday. If recent surplus figures expand then the Euro could appreciate.
The main UK news to watch out for will be Wednesday’s earnings figures.
Inflation previously hit 2.9% in May, the highest annual rate so far this year. By comparison, the rate of growth for earnings with bonuses was 2.1% in April, the lowest rate of 2017.
If wage growth remains low then the Pound could tumble, as it would only further the retail-negative wage squeeze currently felt by UK consumers.
Current Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading at 0.8843 and the Pound to Euro (GBP EUR) exchange rate was trading at 1.1307.
