Pound Euro (GBP/EUR) Exchange Rate Slips even as UK GDP Growth Beats Expectations
The Pound Euro (GBP/EUR) exchange rate slipped by around 0.8% this morning, as Brexit developments overshadowed the latest UK GDP figure.
The pairing is currently trading at an inter-bank rate of €1.1664.
January’s UK GDP expanded by a better-than-expected 0.5%, offsetting December’s contraction of -0.4%.
Likely dampening Sterling was the fact that in the three months leading up to January, GDP only increased by 0.2%, on average.
This matched growth from the previous three months.
ONS Calls UK GDP Figures ‘Sluggish’
Commenting on the figures, Head of GDP at the Office for National Statistics (ONS), Rob Kent-Smith, said:
‘Across the latest three months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth. These were offset by strong performances in wholesale, IT and health services.
‘This sluggish growth came despite the economy bouncing back from a weak December.’
Also commenting on the data, Yael Selfin, Chief Economist at KPMG UK said:
‘The first glimpse of GDP data for this year points to a UK economy hovering well below its growth potential, as we wait for the Brexit fog to dissipate.
‘Clarity on the direction of Brexit should lift business confidence and increase investment, but that could take time to materialise, so we expect growth to remain subdued in the short-term.’
Overnight: Pound Euro (GBP/EUR) Climbs to 22-month High as PM Secures Last-Minute ‘Legally Binding’ Changes
The Pound (GBP) shot up against the Euro (EUR) overnight, with the pairing hitting €1.17 on reports that the UK Prime Minister, Theresa May had secured ‘legally binding’ changes to her EU withdrawal agreement.
Following last minute talks in Strasbourg, May claimed she had secured changes to the Irish backstop to ensure it remains a temporary arrangement, saying:
‘It cannot become permanent. It is only temporary. If it is the case that we were ever to get into the backstop.
‘The legal instrument that we have agreed is an addition to the Withdrawal Agreement. It is legally binding.’
However, European Commission President Jean-Claude Juncker warned:
‘There will be no new negotiations. It is this. In politics, sometimes you get a second chance.
‘It is what we do with the second chance that counts. Because there will be no third chance.’
Yesterday: Euro (EUR) Recovers after Germany’s Unexpected Fall in Industrial Production
The Euro has made attempts to claw back losses today following yesterday’s unexpected fall in German industrial output.
January’s figure was led by a fall in car production which saw industrial production slide to -0.8%.
Following the data release, the Euro was weighed down, causing Mizuho Rates Strategist, Antione Bouvet to comment:
‘Industrial production is hard data and it is really cementing the impression that the European economy is slowing down.
‘It is lending credibility to the view that the slowdown is not temporary.’
Pound Euro Outlook: Will the GBP/EUR Exchange Rate Slide if MPs Reject PM’s Deal?
Looking ahead to this evening, the Pound (GBP) is likely to plummet against the Euro (EUR) if MPs vote against Theresa May’s withdrawal agreement.
Looking ahead to tomorrow’s session, the Pound is likely to fluctuate following Chancellor Philip Hammond’s Spring Statement.
Tomorrow morning, the Euro could slip against Sterling following a speech from the European Central Bank’s Yves Mersch.
If Mersch talks down the Eurozone economy and makes mention of recent weak German industrial data and the challenges the bloc could face following Brexit, the Pound Euro (GBP/EUR) exchange rate could rise.