GBP/EUR Exchange Rate Rangebound as German Car Markets Struggle to Acquire Crucial Parts
The Pound Euro exchange rate held steady this morning as German car manufacturers are struggling to acquire crucial parts. As a result, Eurozone markets are becoming increasingly concerned about the outlook for the economy. The pairing is currently fluctuating around €1.15.
The Euro failed to gain against the Pound after last week saw the German economy shrink by -1.7% amid the Covid-19 crisis.
The Eurozone’s largest economy’s recovery was hampered by a third-wave of the virus in the first quarter of 2021.
The Institute for Economic Research (IFO) also reported that under 14% of German car manufactures have reported that lack of demand has become a problem.
‘At the moment, the main issue is problems with intermediate products, which were reported by 60.4 percent of the companies.
‘That figure compares to only 5.8 percent in July 2020; back in April 2020, it was as high as 42.0 percent. Several automotive plants have now announced they will introduce short-time work due to the shortage in silicon chips.’
Consequently, Euro investors are becoming increasingly cautious about the Eurozone’s economic recovery in the months ahead.
Pound Exchange Rate Edges Higher as UK Factory Activity Surges in April
The Pound (GBP) rose against the single currency following today’s publication of April’s UK Manufacturing PMI. The figure beat forecasts and rose from 60.7 to 60.9.
Markit, the company that compiled the survey, said that strong client confidence had driven the UK’s factory sector last month. Markit explains:
‘Manufacturing production increased for the eleventh successive month in April.
‘Output growth was attributed to a loosening of lockdown restrictions, improved demand and rising backlogs of work. Solid and accelerated expansions of output were seen across the consumer, intermediate and investment goods industries, with the consumer goods category the strongest performer overall.’
As a result, Pound (GBP) traders have become more confident in the outlook for the UK economy, particularly as Covid-19 infection rates continue to remain relatively low.
Professor Neil Ferguson, an epidemiologist for the Imperial College of London and a key government adviser, also commented that he’s ‘feeling family optimistic that we will be not completely back to normal, but something which feels a lot more normal by the summer’.
Mr Ferguson also added that the ‘data is very encouraging and very much in line with what we expected’.
Pound Euro Exchange Rate Outlook: Eurozone PMI Data in Focus
Euro (EUR) investors will be awaiting tomorrow’s release of the Eurozone’s Composite PMI for April.
Any signs of improvement in the outlook for the Eurozone’s economy could buoy the EUR/GBP exchange rate.
Tomorrow will also see the release of Germany’s latest PMI Composite figure for April. If this shows a rebound in the Eurozone’s powerhouse economy, then the single currency could claw back some of its losses.
The Pound Euro exchange rate could head higher this week if the UK’s Covid-19 cases continue to fall and optimism grows in the nation’s economic recovery.