The Euro (EUR) weakened against the Pound (GBP), US Dollar (USD) and other major peers on Tuesday as another round of dire economic data out of Germany weighed heavily and raised concerns that the Eurozone is sliding back into recession.
Germany, the Eurozone’s industrial powerhouse released data which showed that industrial production tumbled by 4% in August, the largest decline seen since the early part of 2009 and was far worse than economist forecasts for a decline of 1.5%.
The fall in production was driven by an 8.8% decline in the manufacture of items such as cars and heavy machinery. Production of intermediate goods fell by 1.9% and consumer goods production weakened by 0.4%. Construction production was also weaker by 2%.
The sharp decline was being blamed on sluggish growth in the Eurozone and as confidence remained low because of Europe’s ongoing standoff with Russia over the Ukraine crisis.
The data also suggests that the measures introduced by the European Central Bank have yet to have had any significant impact.
Economists are now warning that Germany could be heading towards recession.
‘Even if the decline in business confidence triggered by Russia’s aggression in Eastern Ukraine were to end in the coming months, we cannot even rule out a mild recession on the back of this data. A significant rebound in manufacturing, and thus investment is unlikely to come through before early 2015,’ said analysts at Berenberg.
The fall in Germany’s fortunes could also be seen as its policy of austerity coming back to haunt it. With a lack of economic spending, the economy is unlikely to stave off further weakness and could follow the same route taken by other austerity-hit nations.
Euro to Pound Sterling Exchange Rate
Further gains for the Pound were somewhat restrained as economic data out of the UK came in mixed.
According to the London based Office for National Statistics, manufacturing production increased by 0.1% on a monthly basis and by 3.9% year on year.
The report also showed that industrial production was flat in August, compared to expectations for a 0.2% gain, after increasing 0.4% in July.
The data came amid growing expectations that the Bank of England will leave rates on hold until next year.
Euro to US Dollar Exchange Rate
Following the release of the German data, the single currency slumped to a session low against the ‘Greenback’.
Diverging monetary policy expectations have boosted the US Dollar against the Euro in recent months, with the European Central Bank likely to stick to a looser monetary policy stance amid concerns over deteriorating inflation expectations and slowing growth.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.2608 ,
Euro,,British Pound,0.7850 ,
Euro,,Australian Dollar,1.4375 ,
Euro,,Canadian Dollar,1.4099 ,
[/table]
