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Pound Euro Exchange Rate Forecast: GBP/EUR Tumbles as Industrial Production Disappoints

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GBP/EUR Stumbles as Factory Output Fall Below Expectations

The Pound Euro (GBP/EUR) exchange rate is on the retreat today as markets react to the latest UK economic data.

At the time of writing GBP/EUR is down almost 0.2%, with the pairing having fallen over half a cent from the session’s best levels.

Pound (GBP) Slumps as Production Disappoints

The Pound found its attempts to advance against the Euro this quickly cut short this morning following the release of the UK’s latest industrial production figures.

According to data published by the Office for National Statistics (ONS), UK industrial production only saw a marginal rise of 0.1% in February, down from 1.3% at the start of the year and falling short of the 0.4% growth forecast.

The decline appeared to be largely driven by a subdued manufacturing sector as well as further contraction in construction.

Darren Morgan, head of national accounts at ONS said;

‘Manufacturing continued to grow in the three months to February but at the slowest rate seen since the summer, with increases in machinery, metal products and pharmaceuticals offset by falls in electrical appliances and oil refining.’

The disappointing production figures also undermined the accompanying trade figures, which beat expectations as the national trade deficit narrowed from -£2.9bn to -£0.9bn against the drop to -£2.6bn that had been predicted.

Optimistic Draghi Remarks Boost Euro (EUR)

Meanwhile the Euro is pushing higher this afternoon following a speech by European Central Bank (ECB) President, Mario Draghi at the Generation €uro Students’ Award Ceremony, in Frankfurt.

Although Draghi avoided making any direct references to the ECB’s monetary policy, markets welcomed his apparent optimism as he forecast that wages and inflation both look set to rise.

Many investors interrupted this to suggest that the ECB may strike an increasingly hawkish tone over the coming months.

GBP/EUR Forecast: Can Carny Talk up the Pound?

Looking ahead the GBP/EUR exchange rate could see some gains in the second half of this week’s session as investors await a speech by Bank of England (BoE) Governor, Mark Carney.

Markets will look to Carney for any further hints in regards to a possible rate hike from the BoE next month and could see the Pound surge if he appears optimistic towards the currency’s prospects.

Meanwhile the Euro could see some short-term gains on Thursday should the Eurozone’s industrial production have rebounded in February as forecast.