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Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Disappointing German Data Weakens Single Currency

The Euro to Pound Sterling (EUR/GBP) exchange rate weakened on Wednesday as German factory orders made an unexpected decline in February. The weaker-than-forecast report suggests that weakness remains in the Eurozone’s largest economy and that it is still vulnerable to external shocks.

The Euro to Pound Sterling (EUR/GBP) exchange rate fell to a session low of 0.7288

The cause of the decline in orders was mostly blamed on German companies receiving less major contracts as in January orders tumbled sharply. The report also marks the first time since last summer that factory orders have declined for two consecutive months and suggests that the nation’s manufacturing sector has gotten off to a soft start in 2015.

‘Today’s drop in new orders shows that after a series of almost euphoric news and indicators from Germany and Eurozone, some caution is clearly justified. The weak Euro should help German industrial firms. Judging from earlier episodes with similar exchange rate weakness, order books are currently only moderately filled. If past performances are any guide for the future, German exporters can start rubbing their hands,’ said Carsten Brzeski, senior economist at ING.

The data showed that factory orders fell by -0.9% in February, adding to the previous month’s revised fall of -2.6%. The figure was well below the 1.5% increase forecast by economists.

The Euro could soften further if upcoming retail sales data disappoints, alternatively the single currency could firm if sales improve.

Greece/Russia Meeting Ahead

Greek Prime Minister Alexis Tsipras has begun his controversial meeting with Russian President Vladimir Putin but has insisted that he will not be seeking financial aid from Russia. A Greek official says that the two leaders will discuss economic co-operation and bilateral investment and export opportunities.

The leadership of the European Union has warned Tsipras not to break the group’s line on Russian sanctions. Earlier in the year, Greece opposed the implementation of sanctions.

‘We have not asked for financial aid. We want to solve our issues of debt…within the Eurozone. Greece knows what to do within the EU framework but every country also has the sovereign right to look after and improve its bilateral relations,’ said the Greek official.

The Pound Sterling meanwhile, continued to receive support from Tuesday’s stronger than expected Services Purchasing Managers Index (PMI). Also supporting the UK currency was a report, which showed that new car registrations in the UK increased 492,774 in March, the best period of sales for a March on record. The car industry’s record-run of growth has run into a fourth year.

The Pound could make further gains on Thursday if UK balance of trade, house prices data comes in positively. The latest Bank of England interest rate and quantitative easing decision is also due.