GBP/EUR Exchange Rate Nosedives as UK GDP Falls to Just 0.1%
The Pound Euro (GBP/EUR) exchange rate is plummeting this morning as UK economic growth slowed sharply in the first quarter.
At the time of writing the GBP/EUR exchange rate is currently down around 0.5%, with the pairing having relinquished nearly all of the gains made yesterday.
Pound (GBP) Exchange Rate Slumps as UK Growth Slows Sharply in Q1
The Pound Sterling (GBP) exchange rate is in freefall this morning as UK GDP was shown to have slowed much more than forecast at the start of 2018.
According to data published by the Office for National Statistics (ONS) UK GDP slowed to just 0.1% in the first quarter of 2018, down from 0.4% in the final quarter of 2017 and below expectations that economic growth would have only slowed to 0.3%.
Analysts also warn that the ‘Beast from the East’ may have had a negligible impact on GDP, which suggests slowdown in growth may be due to the UK economy losing some of its underlying momentum.
Rob Kent-Smith, head of national accounts at the ONS, said;
‘While the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supply and online sales.’
Further weakening the Pound exchange rate this morning was speculation that the downbeat GDP figures would further dent the chances of the Bank of England (BoE) raising interest rates next month.
Euro (EUR) Exchange Rate Bolstered by Robust Germany Labour Figures
At the same time the Euro (EUR) exchange rate found support this morning from the release of Germany’s latest employment statistics.
Unemployment continued to fall in the Eurozone’s largest economy this month, much to the relief of EUR investors, who have feared that Germany’s economy is beginning to slow.
Peter Altmaier, Germany’s Economy Minister appeared confident that this decline in unemployment is set to continue into the next year as well as he said;
‘Our exporters are competing successfully in a global economy that is expanding briskly. Employment will increase by a further 1 million by 2019, unemployment will fall to a new record low.’
However the Euro’s advance this morning was not all plain sailing as France’s own GDP figures revealed that Europe’s second largest economy also slowed more than expected at the start of 2018.
GBP/EUR Exchange Rate Forecast: While Carney Further Dampen Hopes of a Rate Hike?
Looking ahead the GBP/EUR exchange rate could see further volatility later this afternoon following a speech by BoE Governor Mark Carney.
Carney prompted significant losses in the Pound last week as he suggested that the BoE could delay the next rate hike, suggesting that the bank was ‘conscious that there are other meetings over the course of this year’.
Markets will therefore be playing close attention to Carney’s speech today, particularly in light of the UK’s latest GDP figures, with the Pound likely to nosedive if Carney remains dovish on the prospect of a rate hike next month.
Meanwhile EUR investors are likely to turn their attention to next week and the release of the Eurozone’s own GDP figures, with the Euro exchange rate likely to slump if growth slowed in the first quarter as many economists forecast.