Larger German Trade Surplus Fails to Hold Down GBP/EUR Exchange Rate Today
Although the German trade surplus widened further than expected on Friday morning the Pound Sterling to Euro (GBP/EUR) exchange rate has been regaining ground. Confidence in the Pound appears to be recovering somewhat after yesterday’s ‘Brexit’ worries, with the GBP/EUR currency pair trending lower in the range of 1.2411.
While the appeal of the Euro (EUR) was dented by suggestions that the European Central Bank (ECB) could loosen monetary policy further, this failed to support the Pound Sterling to Euro (GBP/EUR) exchange rate on Thursday.
Euro (EUR) Exchange Rate Volatile as Weaker Eurozone PMIs Encourage Speculation of Further ECB Easing
The Pound Sterling to Euro (GBP/EUR) exchange rate continued to weaken on Wednesday morning as markets were pleasantly surprised by a smaller-than-expected decline in German industrial production. Dipping to 1.3% on the year rather than the 0.4% forecast, output in the Eurozone’s powerhouse economy appeared to remain relatively robust in February.
However, this stronger showing was soon contrasted by the latest raft of Eurozone Retail PMIs, which showed that sharp contractions in the French and Italian retail sectors had dragged down growth across the currency union. With the domestic economy thus showing mixed signs of improvement investors were inclined to renew speculation over the possibility of further monetary loosening from the European Central Bank (ECB), softening the Euro (EUR).
Demand for the Pound (GBP), meanwhile, declined as Business Secretary Sajid Javid arrived in Mumbai to discuss the future of Tata Steel’s UK assets. As the meeting failed to yield a firm timeframe in with the Indian conglomerate is prepared to hold onto its loss-making British mills the attitude of markets remained muted.
Brexit Concerns Dent Pound Sterling (GBP), Euro (EUR) Softens on ECB Dovishness
Investors have also reacted bearishly to the news that the UK government has spent taxpayers’ money on a pro-Remain leaflet campaign. This has naturally caused consternation amongst the ‘Leave’ camp and prompted another volley of criticism in the ongoing ‘Brexit’ debate. As with any reminder of the looming June referendum this has pushed the Pound down today, reigniting fears over the potential negative impacts of ‘Brexit’ uncertainty.
The single currency has softened against many of the majors ahead of the latest ECB meeting minutes, with markets anticipating a reaffirmation of the central bank’s recent dovishness. President Mario Draghi indicated that there is still room for further easing in comments published in the central bank’s annual report, a suggestion that has dented the appeal of the Euro. Nevertheless, the GBP/EUR exchange rate has remained on a downtrend.
GBP/EUR Exchange Rate Forecast: Higher German Trade Surplus Predicted to Strengthen Euro
Should Draghi reiterate this dovish message in comments later this evening the common currency could decline further against rivals. However, traders could be encouraged to favour the Euro if Germany’s trade surplus is found to have widened as anticipated in February. Stronger signs from the Eurozone’s powerhouse economy are likely to dent the odds of imminent ECB easing, to the detriment of the GBP/EUR exchange rate.
Forecasts also suggest that the UK’s industrial and manufacturing production declined once again in February. Any renewed signs of slowing within the domestic economy are expected to drag the Pound lower across the board, particularly if ‘Brexit’ fallout continues to dominate sentiment.
Current GBP, EUR Exchange Rates
At the time of writing, the Pound Sterling to Euro (GBP/EUR) exchange rate was slumped in the region of 1.2349, while the Euro to Pound Sterling (EUR/GBP) pairing was making gains around 0.8098.