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Following the publication of some underwhelming UK industrial production stats on Friday, the British Pound to Euro (GBP/EUR) exchange rate tumbled. The sterling-to-euro cross could remain weak in the coming days if key Eurozone growth stats impress investors or if UK inflation comes in lower than expected.
Last week was highly volatile for GBP/EUR, as the pair opened at the level of 1.1334 before touching on a low of 1.1225 and a high of 1.1442.
On Friday the pair fluctuated closer to the week’s opening levels. Below is the latest snapshot for sterling as of 11/02/2018:
– The pound to australian dollar exchange rate is 1.76937, with a 7 day range of 1.7681-1.7888
– The pound to euro exchange rate is 1.12859, with a 7 day range of 1.1271-1.1366
– The pound to dollar exchange rate is 1.38271, with a 7 day range of 1.3829-1.4109
Pound to Euro (GBP EUR) Exchange Rate Strength Fades as UK Data Leads to UK Growth Concerns
Britain’s economy may not have growth as much in Q4 2017 as previously expected, if some analysts’ readings of the latest UK industrial production stats are to be believed.
UK industrial production was forecast to have contracted at -0.9% month-on-month, but instead plunged to -1.3%. The previous figure was revised lower from 0.4% to 0.3%.
While the previous yearly figure was revised higher from 2.5% to 2.6%, December’s result failed to meet the forecast 0.3% and instead printed at a stagnant 0.0%.
On top of this, Britain’s December trade deficit unexpectedly deepened. The figure was predicted to lighten to £-2.4b but instead worsened to £-4.896b.
In response to the report, James Knightly from ING Bank stated;
‘Softer December trade and production data coupled with downward revisions suggest the potential for fourth quarter GDP growth to be revised down to 0.4% quarter on quarter [from 0.5%]
… The December softness relates to the shutdown of the North Sea Forties pipeline for unplanned maintenance (oil and gas output fell 24.2% month on month) and should rebound in January, but it does suggest the risk of a very modest downward revision to fourth quarter GDP.’
Sterling saw further pressure on Friday due to the latest comments from EU chief negotiator Michel Barnier. Barnier noted that as disagreements continue to arise between UK and EU negotiators in Brexit talks, a Brexit transition period is not a given.
The Euro was able to benefit from the Pound’s late-week weakness despite recent Eurozone data having little notable impact on the shared currency’s outlook.
Wednesday’s Eurozone ecostats were solid, with French and Italian industrial production from December beating expectations in all major prints.
The data followed Thursday’s European Central Bank (ECB) economic bulletin, which showed no signs of changes to the bank’s monetary policy outlook and ultimately left the Euro outlook unchanged.
Other GBP Currency Exchange News
British Pound (GBP) Trade May Be Increasingly Brexit Focused
While some key British ecostats will be published in the coming week, impressive data may be brushed over amid high uncertainties about the Brexit process and Britain’s future trade relations with the EU.
Tuesday will see the publication of Britain’s typically influential Consumer Price Index (CPI) results. UK inflation is currently forecast to have slipped from 3% to 2.9% year-on-year.
However, the Bank of England (BoE) already expects UK inflation to remain strong. Instead, investors are more likely to be concerned with the Brexit process and how uncertainties about UK-EU trade could limit Britain’s growth.
Friday’s January UK retail sales results could be influential too. If they indicate that UK consumer activity was better in January than expected, investors will be more hopeful about the resilience of Britain’s economy and this could boost the Pound.
- The GBP-impacting events in the next seven days include the CPI (Source), the PPI Input, the RPI, the Core CPI, the HPI (Source), the PPI Output, the CB Leading Index (Source), the Retail Sale and the Rightmove HPI (Source).
Euro (EUR) Forecast: Major Eurozone Growth Projections Due Wednesday
The Euro could be more likely to drive GBP/EUR movement in the coming days due to influential Eurozone data due for publication in the coming days.
While Monday and Tuesday’s sessions will be relatively quiet for data, Wednesday will see the publication of a slew of notable stats.
Germany’s final January inflation results will be published, as well as German Gross Domestic Product (GDP) projections for Q4 2017.
Other Q4 growth projections due on Wednesday includes data from Italy, The Netherlands and the Eurozone overall.
Towards the end of the week more notable data will be published, including French unemployment as well as inflation data from Spain and Ireland.
- The EUR-impacting events in the next seven days include the French Industrial Production (Source), the EU Economic Forecasts (Source), the French Final CPI, the Italian Prelim GDP (Source), the German ZEW Economic Sentiment (Source), the ZEW Economic Sentiment, the German Prelim GDP (Source), the German Final CPI, the Flash GDP (Source), the Industrial Production, the Italian Trade Balance, the Trade Balanc and the German WPI.