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Pound Sterling Euro (GBP/EUR) Exchange Rate Rallies on Pessimistic German Growth and Record High UK Employment

Euro Currency Forecast

Pound Euro (GBP/EUR) Exchange Rate Rises on Weak German Growth Outlook

The Pound Euro (GBP/EUR) exchange rate rose 0.6% today, and is currently trading at an inter-bank rate of €1.1494.

The German ZEW economic sentiment index improved by more than forecast in February, with sentiment at -13.4, up from the previous -15.

The ZEW current situation index, on the other hand, slipped further than anticipated, falling from 27.6 to 15, and confirming that investors remain pessimistic about the current situation in Germany.

ZEW President Achim Wambach commented on the data, noting:

‘At the moment, we do not expect a rapid recovery of the slowing German economy. The economic situation in Germany has been weak, especially in the manufacturing sector. […] For the next six months, the financial market experts in our survey do not expect any improvement.’

Earlier: Pound (GBP) Rises as UK Wages Grow at Fastest Pace in a Decade

The Pound to Euro (GBP/EUR) exchange rate gains were supported by the release of the UK unemployment and average wage growth data.

Unemployment remained steady in the three months leading up to December, holding at 4%, the lowest level of unemployment since 1975.

The Pound was bolstered as the level of employment continued to rise, hitting a record high 32.6 million people in work.

UK average earnings did not rise as expected however, with growth in both wages including and excluding bonuses rising by 3.4%.

Wages still rose at the fastest pace in a decade however, buoying Sterling.

Commenting on the data, Head of Communications at the Centre for Policy Studies Emma Barr stated:

‘These figures are extremely reassuring. Even as we prepare to leave the EU, the British economy – and British business – is still creating jobs at an enviable rate, with record levels of people in work thanks to our flexible labour market.’

Brexit Anxieties Weigh on Sterling (GBP) Following Honda Factory Closure

The Pound (GBP) managed to post broad-based gains on Tuesday despite news that Japanese carmaker Honda announced plans to close its factory in the UK, which has been described by Business Secretary Greg Clark as ‘devastating’.

This is said to put around 7,000 jobs on the line, double the expected figure that had been revealed earlier in the day.

Meanwhile, the company has insisted that the decision was not influenced by Brexit, however analysts have denied that it is possible to remove Brexit from the equation.

GBP/EUR Outlook: Will Fruitless Brexit Decisions Weigh on Sterling?

With Brexit fast approaching, it is likely that this will continue to remain one of the main catalysts for the GBP/EUR exchange rate.

During his speech today, Vice-President of the European Central Bank (ECB), Luis de Guindos warned of the impact of a no-deal Brexit, stating:

‘A disorderly Brexit […] would represent a significant macroeconomic shock at the time when the European economy is already weakened.’

So, if the meeting between UK Prime Minister Theresa May and President of the European Commission Jean-Claude Juncker points towards signs a no-deal will be avoided, the pairing could rise, with the euro potentially gaining against other currencies at the same time.

Meanwhile, the Euro could be pressured lower tomorrow following the release of Germany’s Producer Price Index.

If German producer price inflation slips by 0.2%, contracting for the second month in a row as forecast, the Euro could slide against Sterling.