Pound Euro (GBP/EUR) Exchange Rate Muted as German Industrial Production Slumps
The Pound Sterling Euro (GBP/EUR) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of €1.1125.
Industrial production in the Eurozone rose by a higher-than- forecast 0.9% in May following an upwardly revised -0.4% in April.
This was more than the 0.2% forecast rise and the highest jump in production since January 2019, although this could do little to buoy the single currency.
Month-on-month the production of non-durable goods jumped by 2.7% and durable goods by 2.3%.
However, Eurostat revealed that Germany suffered one of the largest decreases in industrial production, slumping by -4.3%.
Commenting on the data, Economist at Dutch ING Bank, Bert Colijn said:
‘Don’t let the numbers fool you. Without an improved trade outlook, manufacturing could be in for a weak second half of the year.’
Sterling (GBP) Flat as No-Deal Brexit Will Cause BoE to Slash Rates to Zero
On Friday morning, Bank of England (BoE) official, Gertjan Vlieghe revealed that interest rates may need to be brought all the way down to zero in the case of a no-deal Brexit.
In a speech, the BoE official added that he was unclear of how long it would take rates to rise again.
‘On balance I think it is more likely that I would move to cut Bank Rate towards the effective lower bound of close to 0% in the event of a no-deal scenario.
‘It is highly uncertain when I would want to reverse these interest rate cuts.’
However, he also added that if the UK is able to ease its way out of the European Union with a deal the bank would likely raise rates.
Vlieghe suggested that the bank could raise rates to 1% in a year, and 1.25% in two and 1.75 in three years’ time, although this would also depend on the global economy recovering from its slowdown.
Euro (EUR) Muted as German Inflation Edges Closer to ECB’s Target
Meanwhile, on Thursday data showed that German annual inflation rose to 1.5%, up from the flash reading of 1.3% at the start of the month.
Inflation edged closer to the European Central Bank’s (ECB) target of close to but below 2%.
However, it continued to remain below target which likely weighed on the single currency.
Added to this, the European Commission lowered its expectations for growth and inflation in the bloc.
The Commission stated that it predicted growth would slow down to 1.2% in 2019, from 1.8% in growth in 2018.
Pound Euro Outlook: Will Disappointing German Economic Sentiment Weigh on EUR?
Looking ahead to the start of next week, the Pound (GBP) could edge up against the Euro (EUR) on Tuesday following the release of the UK unemployment rate.
If unemployment dips further in the three months to May it could buoy Sterling.
Meanwhile, the single currency could slide following the release of Germany’s ZEW economic sentiment survey.
If economic sentiment slumps further than forecast it could cause the Pound Sterling Euro (GBP/EUR) exchange rate to rise.