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Pound Sterling to Euro (GBP/EUR) Exchange Rate: UK Trade Deficit Woe Forces Pound Lower

Conservative MP Batters ONS, Claims Statistics ‘Barely Fit for Purpose’

Andrew Tyrie, a Conservative MP and head of the Commons Treasury Select Committee has attacked the Office for National Statistics (ONS), claiming the organisation is ‘prone to silly mistakes’. His comments reinforce those of critics who claim the UK economy growth may seem so poor because of bad measurements of growth. An error last year caused the ONS to underestimate annual national income growth by 0.5%, mistakenly giving the final figure as 2.4% instead of the actual 2.9%.


Eurozone data released today has shown that Germany’s Industrial Production slowed, which has allowed the GBP/EUR exchange rate to regain some of the ground lost yesterday thanks to the bullish Euro (EUR). Trader profit-taking is also causing a strong market correction, with the Euro gradually erasing gains against the major currencies.

GBP/EUR Exchange Rate Turns Bullish Despite Trade Balance Disappointment

More bad news for the UK economy today after yesterday’s warnings from George Osborne: the UK Trade Balance deficit fell less-than-expected, narrowing from -£11,203 billion to -£10,642 billion instead of declining to -£10,500 billion as forecast. The narrowing deficit has been caused by imports dropping at a faster rate than exports, with imports falling -1.8% to £45.4 billion compared to a -1.2% drop in exports to £42.2 billion. The drop in imports is mostly attributed to a lack of demand for oil, with total imports dropping by -£0.5 billion to £2.2 billion.

Despite a strengthening Eurozone economy, demand for British exports remains low. The British EU goods trade deficit reached a record high of -£8.2 billion in November. A major concern is that imports grew faster in the services sector, which the UK has long relied upon to counteract the weakness in other areas of the economy.

Despite this, Pound Sterling has been able to advance on the Euro as trader profit-taking weakens the common currency.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading in the region of 1.3440.

EUR/GBP Exchange Rate Slumps Along with German Industrial Production

The Euro is losing ground today after overseas weakness and a surprise fall in unemployment sparked a rapid uptrend. Today’s data has not been as positive, showing that German Industrial Production growth slowed to a seasonally adjusted 0.1%, declining -0.3% month-on-month (MoM), despite predictions of 0.5% growth. The German Trade Balance figures performed slightly better: although the €22.3 billion surplus did contract, the final €20.6 billion figure was €0.4 billion larger than forecast.

Trader profit-taking on a strong Euro is causing the common currency to plummet against many of the majors, making losses of -0.4% against Pound Sterling, -0.5% against the US Dollar (USD) and the Canadian Dollar (CAD) and -0.7% against the Indian Rupee (INR), the New Zealand Dollar (NZD) and the South African Rand (ZAR).

The correction comes after the People’s Bank of China (PBoC) took action to calm trader concerns, resulting in a positive day of trading in Shanghai as stocks slowly rose. Germany’s DAX index has opened 0.4% higher, although compared to yesterday’s -3% loss there is still a considerable way to go to repair the damage.

The EUR/GBP exchange rate is currently trending between 0.7423 and 0.7474.

GBP/EUR Exchange Rate Forecast: Key Chinese Data Could Reignite Market Fears

Considering the impact poor manufacturing data had on the global markets, wiping around -£1.4 trillion from global equities in just four days, Chinese Inflation figures due out on Saturday during the Australasian session could spark further volatility which may impact both Pound Sterling and the Eurozone. UK data releases won’t resume until Tuesday, when Industrial and Manufacturing Production figures are due out, along with the NIESR GDP Estimate, while the Eurozone waits until Wednesday to release Industrial Production Figures.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading between 1.3369 and 1.3466.