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Euro to Pound (EUR/GBP) Exchange Rate Dips as German Industrial Production Falls

Euro Pound exchange rate outlook

EUR/GBP Exchange Rate Falls as Outlook for the Eurozone Economy Struggles as German Lockdown Limits Growth

The Euro to Pound (EUR/GBP) exchange rate fell by -0.2% today, with the pairing currently fluctuating around £0.85.

The Euro (EUR) fell against the Pound today following this morning’s release of the latest German Industrial Production data, which fell below forecasts by -2.5%.

Andrew Kenningham, the Chief Europe Economist at Capital Economics, was downbeat about the outlook for the Eurozone’s largest economy, saying:

‘With Covid-19 restrictions having been extended until the end of March, and potentially running for longer, overall economic activity will remain subdued for some time. There should be a sustained recovery from the second quarter, however, provided that the vaccination programme gathers pace.’

As a result, EUR investors are becoming increasingly cautious about the outlook for the Eurozone’s economy, as the largest economy in the bloc will be under lockdown restrictions until late this month.

Increasing pessimism around the Eurozone’s economic performance is also hampering the EUR/GBP exchange rate today.

Nonetheless, investor morale is growing across the Eurozone, providing some uplift for the single currency.

Sentix, which compiles the economic data for the Eurozone, commented:

‘The pandemic seems to have peaked at the global level and vaccination is also progressing well in that the number of immunised individuals is increasing, and statistics suggest that effective vaccination protection is being achieved.’

Pound (GBP) Rises on Strong UK Consumer and Business Confidence in February

The Pound (GBP) rose today following the publication of the latest UK Consumer and Business Confidence for February.

Both beat forecasts, showing a promising outlook for the UK economy now that the Government has forwarded a lockdown exit plan that promises to be both cautious and ‘irreversible’.

UK Consumer Confidence has risen to its highest level since the pandemic, according to YouGov, which revealed an increase to 105.4 last month.

Analysts at Reuters commented:

‘YouGov said its consumer confidence score increased by two points to 105.4, driven by expectations for business activity, house prices and household finances over the next year.’

Andrew Bailey, the Bank of England’s (BoE) Governor, was also confident about the outlook for the UK economy, but warned that things might not return to how they were before the pandemic.

A falling Covid-19 infection rates and death toll throughout the UK has also contributed in growing optimism for the UK economy, boosting the GBP/EUR exchange rate.

EUR/GBP Exchange Rate Forecast: Could Strong UK Economic Confidence Continue to Drive Sterling This Week?

Euro (EUR) investors will be looking ahead to tomorrow’s release of the Eurozone’s GDP data for the fourth quarter.

Any improvement in the outlook for the Eurozone’s economy would be EUR-positive.

Tomorrow will also see the release of Germany’s Trade Balance data for January. If this points to increased activity in the Eurozone’s largest economy, then the EUR/GBP exchange rate would head higher.

Pound (GBP) investors will be monitoring tomorrow’s release of the February BRC Like-for-Like Retail Sales figure.

We could see the Pound continue to head higher against the single currency, however, if the outlook for the UK’s economy continues to improve on strong economic data and falling Covid-19 cases.