Euro Pound (EUR/GBP) Exchange Rate Narrows as German Industrial Production Plunges
The Euro Pound (EUR/GBP) exchange rate is narrowing today, after the German industrial production data showed a sharp drop.
At the time of writing, EUR/GBP traded at around £0.8936, trading in a narrow bound from the morning’s opening rates.
Euro (EUR) Struggles as German Industrial Production Declines Sharply
The Euro (EUR) is weakening against most peers today, following the release of the latest German industrial production data.
Industrial production in Europe’s largest economy plunged sharply to -3.1% from the previous month. Analysts had forecast a drop of 0.7%, but the below-forecast result came as a surprise.
The plunge reflects the energy-intensive industrial sectors dramatic dip in production. Furthermore, the fall is the latest in a string of data which bodes ill for the German economy.
Carsten Brzeki, the Global Head of Macro at ING, explored this further. He stated:
‘Despite the recent return of optimism as illustrated by improving sentiment indicators, the sharp drop in new orders, the inventory build-up in recent months and the lagged impact of high energy prices all still bode ill for the short-term outlook.’
Pound (GBP) Stumbles On Pared Back Rate Hike Bets
The Pound (GBP) is struggling today, as investors continue to readjust their expectations for the Bank of England’s (BoE) future tightening.
Yesterday saw a hawkish speech on Monday from BoE Policymaker Catherine Mann, who inspired strength in GBP. Today, comments from former BoE Policymaker Danny Blanchflower may be keeping Sterling low.
Blanchflower stated:
‘We are seeing house prices tumbling. You’re going to start to see really bad stuff appearing as these economies slow fast and the central bank and the markets are then going to respond to that.’
Further weighing on the Pound could be the release of the British Retail Consortium’s (BRC) retail sales data for January.
The data showed that sales had fallen from 6.5% to 3.9%, reflecting the UK consumer’s declining ability to spend. With cost-of-living, inflation and interest rate pressures baring down on consumers, it leaves the picture looking bleak for the UK’s economy.
Euro Pound (EUR/GBP) Exchange Rate Forecast: Thin Trade to Weigh on EUR?
Looking ahead for the Euro, trading conditions are thin for the short term. As such, EUR rates may be affected by domestic headlines across the bloc.
For instance, with the Ukraine-Russia war showing little sign of abating, further developments could weigh on the Euro. Russia appears to be on the precipice of mounting another offensive, which may dampen sentiment towards EUR.
For the Pound, domestic headlines are likely to be in focus for GBP investors. With pertinent macroeconomic data releases thin on the ground, headlines about the UK’s economic strife could weigh on Sterling.
However, if risk appetite continues to increase across the session, Sterling could see gains. As the currency becomes increasingly risk-sensitive, upbeat market moods grow more likely to lift GBP.
