The Pound Euro (GBP EUR) exchange rate extended its weekly gains this morning thanks to the release of some worse than expected factory production figures from Germany.
Euro (EUR) Weakened by Slip in German Factory Output
The Euro found itself slipping even further this morning, relinquishing even more of the gains made in the tail end of last week as market sentiment was weakened by a larger than expected decline in German Industrial Production.
According to data published by Germany’s statistics agency, Destatis factory output plummeted 1.6% in September a notable fall from the previous month where production growth struck 2.6% and falling below expectations that the decline would be capped at -0.8%.
The fall in production was largely attributed to a sharp fall in capital goods output, which fell 2.7%, while also being driven by a 4.3% decline in energy production.
However data showing yesterday that Germany’s factory order remained robust over the same period, analysts remain confident that German industrial activity will continue to tick higher in the long term.
ING’s chief German economist Carsten Brzeski said;
‘Despite today’s setback, all ingredients are in place to see a resurgence of industrial activity in the coming months.’
‘Yesterday’s new order data, survey-based order books data at all-time highs and inventories having dropped significantly, closing in on record-low levels from 1990, are all strong arguments that the hard data will catch up with buoyant sentiment indicators.’
Pound’s (GBP) Advance Slowed by Retail Data
While Sterling continues to recover from last week’s slide, its gains this morning have been tempered slightly by the release of a retail report from the British Retail Consortium (BRC) suggesting that UK retail sales slowed in October.
According to the BRC’s latest report retail sales growth slowed to just 0.2% in October, a notable fall from the 2.4% growth registered at the same point last year.
The downturn in sales appeared to mostly driven by the increased financial pressures placed on consumers in recent months, with household tightening their belts as they face soaring inflation and weak wage growth.
Hannah Maundrell, editor in chief of money.co.uk said;
‘Despite retailers best efforts it’s not surprising households have tightened their purse strings in light of inflation rising and the lack of wage growth. Everyone is dubious about parting with their cash just in case.’
With retailers now entering the key Christmas trading period markets fears that the fall in consumer spending could lead to a fairly rough end of the year for many.
GBP EUR Forecast: Brexit Trade Policy to Be Published
Looking ahead the GBP EUR exchange rate could be prompted to rally even higher later today as the UK government is set to publish its post-Brexit trade legislation, with investors hoping that the papers will reveal more about how the UK trade agreements outside of the EU may look.
Meanwhile the Euro may tumble again tomorrow with the release of France’s latest trade figures with economists forecasting that the nation’s trade deficit will have risen in September.
Current Interbank Exchange Rates
At the time of writing the GBP EUR exchange rate was trending around 1.1365 and the EUR GBP exchange rate was trending around 0.8800.