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Brexit Jitters Keep Pound Sterling to Euro Exchange Rate Outlook Lower despite German Growth Fears

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Pound to Euro Exchange Rate Hits New 3-Week-Worst amid Mixed German Data

Despite continued concerns about the Eurozone’s growth outlook, Brexit jitters have continued to cause significant downside for the Pound Sterling to Euro (GBP/EUR) exchange rate so far this week, keeping the pair near its worst levels in over half a month.

GBP/EUR movement was volatile last week, with the pair fluctuating between highs of 1.1305 and lows of 1.1193 before closing the week just slightly lower than opening levels, at the level of 1.1233.

This week so far, Brexit jitters have dragged GBP/EUR even lower. At the time of writing on Tuesday morning, GBP/EUR was trending near a 3-week-low of 1.1185.

With today and yesterday’s German factory stats showing a mixed picture, Euro (EUR) investors may be awaiting German data due later in the week before making the next big moves on the shared currency.

Pound (GBP) Exchange Rates Slide as Hopes of Brexit Deal Fade

In the last few weeks, fresh hopes that UK Prime Minister Boris Johnson could still reach a softer Brexit deal with the EU offered the Pound (GBP) some support.

However, those hopes have since softened, and no-deal Brexit fears are once again becoming a pervasive factor in the Pound’s movement.

EU officials have indicated they are unhappy with Johnson’s latest Brexit plans, but Johnson continues to claim that he will still take Britain out of the EU on the 31st of October even if a deal is not met.

While hopes are fading though, markets are likely to remain at least a bit hopeful until an upcoming EU Summit, which is perceived as the final chance for a deal to be made before the 31st of October Brexit date.

This is limiting the unappealing Pound’s potential for losses, meaning it could still fall further if the situation worsens.

Euro (EUR) Exchange Rate Find Support in Surprising German Production Stats

Despite analysts forecasting another month of contraction for German industrial production, August’s print surprised investors today with a positive reading of 0.3%.

The figure was forecast to soften from last month’s concerning contraction of -0.4% to -0.1%.

The data indicated that there had been a surprising bounce-back in German factory activity, and it offered the Euro a little fresh support this morning.

Still, analysts warned markets to not read into the stats too much, as fluctuation is to be expected in summer months. According to Peter Vanden Houte, Chief Economist at ING:

‘This is finally some good news coming from the biggest economy in the Eurozone. However, there is no reason to get overexcited. Industrial production is always volatile during the summer months, so September will be more important to assess whether we can really talk about a trend reversal.’

It followed yesterday’s German factory orders report, which showed a worse than expected contraction of -0.6% in the August print.

Pound to Euro (GBP/EUR) Exchange Rate Awaits Key Data and Brexit News

The Pound’s movement this week has been subdued so far, as no-deal Brexit fears return and the Pound has little else driving it for now. Amid a lack of notable data due tomorrow, Brexit speculation will continue to drive GBP/EUR tomorrow as well.

This is leaving Sterling investors awaiting Thursday’s key UK data, as well as of course any upcoming Brexit developments.

UK trade balance, growth, and factory stats will be published on Thursday, making for this week’s biggest slew of British data.

The next batch of influential Eurozone data will be published on Thursday, as well.

German trade and French industrial production stats will be published, ahead of Friday’s key German inflation rate report.

When it comes to Brexit speculation, Pound to Euro (GBP/EUR) exchange rate investors will be looking at the health of UK-EU relations, with mere weeks now until Britain is set to leave the EU.