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Pound Euro (GBP/EUR) Exchange Rate Edges Higher as German Factory Orders Fall in November

European Central Bank

GBP/EUR Exchange Rate Improves, Germany’s Export-Dependent Economy Struggles

The Pound Euro (GBP/EUR) exchange rate improved today, with the pairing currently trading around €1.179 after Germany’s month-on-month factory orders figure for November fell below forecasts from 0.2% to -1.3% due to weak foreign demand.

Analysts at Reuters commented:

‘Germany’s export-dependent manufacturers are struggling with sluggish demand from abroad as well as business uncertainty linked to trade disputes and Britain’s decision to leave the European Union.’

Today also saw the Eurozone’s December business climate figure fall from -0.21 to -0.25, which caused further concern for the bloc’s economic outlook in the year ahead.

After yesterday saw the flash Eurozone core inflation figure for December undershoot the European Central Bank’s target of 2%, Euro traders have become increasingly jittery.

A combination of factors, such as Brexit and rising tensions in the Middle East, are continuing to provide obstacles for the bloc’s economic recovery.

GBP/EUR Exchange Rate Rises as Brexit Parliament’s Debates Steam Ahead

The Pound (GBP) edged higher against the Euro (EUR) as debates over the UK-EU Brexit Withdrawal Agreement Bill are set to face their second round of discussions in the House of Commons today.

Sterling traders have also reacted positively to Prime Minister Boris Johnson’s meeting with the European Commission President, Usula von der Leyen, today, with investors becoming more optimistic that a patch can be cleared for a 31st January exit from the European Union.

A spokesman for Downing Street commented:

‘At the leaders’ first face to face meeting since Von der Leyen took office in December, the prime minister is expected to stress the importance of agreeing a confident and positive future relationship by the end of December 2020.’

The Withdrawal Agreement Bill is also expected to pass through the House of Commons, with the Prime Minister’s comfortable majority effectively ensuring that it will pass little resistance from the opposition parties.  

As a result, Pound investors are becoming increasingly confident that the UK could exit the EU without much incident by the end of this month, allowing businesses to make plans for the year ahead.

GBP/EUR Outlook: Could a Dovish Bank of England Weaken Sterling?

Pound investors will be looking ahead to tomorrow’s speech by the Bank of England’s Governor, Mark Carney. Any dovish comments about the British economy post-Brexit, however, proving Pound-negative.

Brexit developments will also continue to drive the GBP/EUR exchange rate tomorrow. Any indications that relations between the UK and the EU could breakdown over some of Boris Johnson’s demand in the new Bill could weaken the Pound, as Brexit uncertainty would threaten to return.

Euro traders, meanwhile, will be awaiting tomorrow’s publication of the German industrial production figure for November, which is expected to improve from -1.7 to 0.7%. However, with geopolitical uncertainties waging on, this may not be enough to boost the single currency.