The Euro to Pound Sterling (EUR/GBP) exchange rate fell to a new 7-year low on Friday despite the release of positive German Industrial Production data and Eurozone GDP data, which matched economist forecasts.
The Euro to Pound Sterling Exchange Rate fell to a session low of 0.7209
Against the US Dollar, the Euro touched a new 11-1/2 year low as traders sell off the currency and sent it down to its lowest level since September 2003. The sharp selloff comes as the markets await the start of the European Central Bank’s (ECB) €1 trillion quantitative easing programme on March 9.
The ECB is planning to buy €60 billion worth of assets each month until September 2016 or beyond if necessary. Many of the bonds the central bank hopes to buy will be purchased from banks operating outside the Eurozone, something that is set to weaken the single currency, as the foreign banks will be handed Euros, which they could then exchange for other currencies.
‘With the ECB buying more bonds than are being issued, this is a huge negative for the Euro. All roads at present lead to a weaker Euro and an outperforming equity market,’ said Chris Weston from IG.
The quantitative easing programme caused investors to ignore the publication of positive German and Spanish industrial production data and GDP data, which matched economist forecasts. German industrial production rose for a fifth consecutive month in January in a sign that the currency blocs largest economy is strengthening.
German industrial production was shown to have increased by 0.6% on a monthly basis and by 0.9% on an annual basis. Data out of Spain also came in positively as production rose by 0.4%, above forecasts for a fall of -0.1%.
According to Eurostat, Eurozone GDP expanded by 0.3%. On an annual basis the region’s economy expanded by 0.9%. Both figures matched economist expectations. The expansion was said to have been boosted by a 0.4% rise in household consumption.
‘Trade also boosted the region’s economy, with exports up 0.8% compared to a 0.4% rise in imports. It is especially encouraging is the news that all four largest Euro countries, Germany, France, Italy and Spain, are all now expanding in unison, which should help improve the sustainability of the recovery for the region as a whole,’ said Chris Williamson, chief economist at Markit.