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German Manufacturing Slump Leaves Pound Euro (GBP/EUR) Exchange Rate Flat

Pound Euro (GBP/EUR) Exchange Rate Muted as German Manufacturing Slump Continues

The Pound Euro (GBP/EUR) exchange rate remained muted at the start of Friday’s session, leaving the pairing trading at around €1.1789.

The single currency remained under pressure this morning after further disappointing German data showed the manufacturing slump continued.

November’s pickup seemed to only bring a temporary bout of relief for the bloc’s largest economy as December’s data painted a different picture.

Industrial production slumped by -3.5% in the final month of the year, marking the fifth drop over the last seven months.

Annually, production plummeted by close to 7%, with activity in the construction sector falling by 8.7% between November and December.

The export-reliant economy also posted a disappointing trade balance at the end of 2019, as exports rose by just 0.1%.

The trade balance narrowed to €15.2 billion, which weighed on the single currency.

Commenting on this morning’s data, ING Germany’s Chief Economist, Carsten Brzeski noted:

‘There are very few positive elements to find in the December industrial data. In fact, the data has raised the risk that next week’s GDP data could bring back the R-word for the German economy. A black zero for fourth quarter GDP growth would be a positive surprise. Today’s data is another reminder that 2019 was definitely a year to forget for German industry.’

Pound (GBP) Flat as Traders Focus on UK-EU Trade Negotiations

Sterling remained under pressure against a handful of currencies on Friday as investors continued to look at the country’s relationship with the EU.

Markets were cautious after Prime Minister Boris Johnson took a hardline with the European Union ahead of trade talks.

Talks need to conclude before the transitionary period ends at the end of this year to avoid a disruptive break.

Commenting on this, Nomura FX strategist, Jordan Rochester stated:

‘It’s very hard to square the circle. We’ve gone from a place where the market expected common ground to be found to a place of brinkmanship again.’

Meanwhile, if GBP is able to make gains against the Euro next week these could be limited.

In a note, ING analysts wrote:

‘While GBP benefited from the risk rally in the middle of the week, its gains vs EUR and USD have been limited as the overhang of upcoming UK-EU negotiations limits GBP upside potential.

‘We continue to expect the periods of GBP rebounds to be shallow and short-lived.’

Pound Euro Outlook: Will Weak UK GDP Weigh on GBP?

Looking ahead to the start of next week, the Pound (GBP) could continue to remain under pressure against the Euro (EUR).

If investors continue to fret about the outcome of trade negotiations between the UK and EU, Sterling will slide.

Tuesday could see the pairing dragged further, following the release of UK growth data.

If flash UK GDP stagnates in the final quarter of 2019, the Pound Euro (GBP/EUR) exchange rate will extend its slump.