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GBP to Euro Bearish Despite Dismal German GDP


The Pound to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2469, hitting a low today of 1.2454 and a high of 1.2496. Movement at this time is around -0.10% which is likely connected to the European domestic data released earlier today.

Yesterday was an awful day in terms of UK economic news, with disappointing reports resulting in losses across the board for Sterling. A positive unemployment rate at 6.4% was completely overshadowed by a drop in average weekly earnings from 0.4% to -0.2%. The bad news held trader focus and the Pound plummeted in response.

The bitter taste left by average weekly earnings data became completely unbearable following the Bank of England’s (BoE) Inflation Report. In the dovish report the committee decided on a continuation of their current monetary policy which has remained unchanged since 2009. Governor Mark Carney intimated at a shift in focus from unemployment to wage growth. Any hope of an interest rate hike before the close of the year has been all but squashed.

Yesterday was a little less disastrous for the Euro compared to the Pound, but less-than-ideal nonetheless.  The German Consumer Price Index stayed faithful to the forecast figure of 0.8%, but Eurozone Industrial Production dominated focus having dropped to 0.0% from the previous figure of 0.6%. A positive result from the Greek Gross Domestic Product (GDP) went a little way towards boosting the Euro.

The Pound Sterling to Euro exchange rate has hit a low today of 1.2454.

Today has seen little difference in the UK economic state of affairs having had no significant domestic data releases. The RICS House Price Balance may not have a huge influence on Sterling, but any poor result aids the downward trend. Indeed the result was bleak having shown a declination from the previous figure of 52% to 49%.

In stark contrast; today’s European domestic data docket is charged with important economic statistics.

Year-on-year French Gross Domestic Product saw a drop from 0.8% to 0.1%.

More importantly, in terms of European economic weighting, is the result from the German GDP.

German Gross Domestic Product fell from 2.5% to 0.8% having been forecast to drop to only 1.3%. This has, and will, have a huge impact on Europe and the strength of the Euro. The German Federal Statistics Office has blamed the result on mild weather. Christian Schulz, senior economist at Berenberg bank, stated; ‘It seems to be caused largely by weather […] The mild winter this year means the usual spring recovery in construction didn’t happen’. Also the year-on-year Eurozone Gross Domestic Product saw a decline, although somewhat milder than France and Germany, from 0.9% to 0.7%.

The Pound Sterling to Euro exchange rate has hit a low today of 1.2454.

Forecast for the Pound to Euro Exchange Rate

Tomorrow will be extremely important for the UK economy with the second quarter year-on-year Gross Domestic Product results to be released. It is forecast to maintain the previous figure of 3.1%. Traders invested in the Pound will hope for a positive result in order for Sterling to recover some of its losses over the last few days. Matt Olney at Future Currency Forecast has predicted that ‘The Pound could regain some ground against the single currency on Friday if GDP data for the UK comes in strongly.’ A negative result will spell disaster for both the economy and the strength of the Pound.

Expect little movement for the Euro tomorrow as there aren’t any domestic data releases.

The GBP to Euro exchange rate has hit a high today of 1.2496.