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Euro Pound (EUR/GBP) Exchange Rate Sinks as ‘Major Falls’ for German Industrial Sector Expected

Pound Sterling Currency Forecast

EUR/GBP Exchange Rate Falls as German Factory Orders Fall in February

The Euro to Pound (EUR/GBP) exchange rate dipped by -0.2% after Germany’s factory orders for February fell from 4.8% to -1.4%, with the Eurozone’s powerhouse economy expected to get much worse before it gets better this year. The pairing is currently trading around £0.878.

Germany’s Economy Ministry said in its statement:

‘The orders data showed that the industrial recession in Germany was over before the outbreak of the [coronavirus] pandemic.’

‘Given the global economic shock the pandemic is causing, however, we have to expect major falls in orders for March and April and sharp drops in production in the first and second quarters.’

The Euro (EUR) also suffered from comments from the Federation of German Industries (BDI) which estimated that the German economy could contract by 3-6% this year due to the coronavirus pandemic.

Meanwhile, the EUR/GBP exchange rate is being compromised by the coronavirus’ testing of European solidarity, with fears that the usually austere EU may struggle to address the surging government debt in countries like Italy and Spain.

Pound (GBP) Exchange Rate Rises Despite Boris Johnson Covid-19 Fears

The Pound (GBP) edged higher after European markets opened this week, despite investors remaining cautious after UK Prime Minister Boris Johnson was admitted to hospital as a precautionary measure to treat his coronavirus infection.

Today also saw UK car sales plunge by 44.4% in March due to the spread of the coronavirus.

The Society of Motor Manufacturers and Traders (SMMT) commented on the report:

‘The performance represented a steeper fall than during the 2009 financial crisis and the worst March since the late nineties when the market changed to the bi-annual plate change system. With lockdowns taking place in many European countries earlier than the UK, even more dramatic falls have been reported elsewhere, with Italy down -85%, France -72% and Spain down -69% in March.’

GBP also seemed to shrug off the release of the UK’S GfK Consumer Confidence gauge for March, which plummeted in its biggest fall since 1974, and dampened household’s financial hopes going forward.

GfK client strategy director Joe Staton commented on the report:

‘The drop in the index to -34 from -9 in its regular survey for March, conducted earlier in the month, was the biggest in more than 45 years.’

EUR/GBP Forecast: UK Coronavirus Developments in Focus

Euro (EUR) investors will be awaiting tomorrow’s release of February’s German industrial production report, which is forecast to drop by -1%.

Consequently, we could see the single currency sink as the Eurozone’s largest economy continues to indicated a downturn even before Covid-19 took hold of its economy.

Meanwhile, we could see Sterling lose some of its gains if Boris Johnson’s condition worsens.

Furthermore, with relatively few UK economic data release due out this week, the nation’s coronavirus developments will remain the key driver behind the GBP/EUR exchange rate.