The Pound Sterling to Euro (GBP/EUR) exchange rate breached the 1.28 level on Friday following the release of more dire economic data out of the Eurozone’s top two economies.
German data heightens Eurozone worries
Data released in Germany showed that industrial production in the 19-member currency bloc’s largest economy fell unexpectedly for the first time in three months in November. The cause of the drop was a fall in the output of energy. The negative data suggests that a German recovery remains vulnerable.
A separate report also showed that German exports declined by 2.1% in November, reducing the nation’s trade surplus and raising concerns that the economy is faltering yet again.
In seasonally adjusted terms, Germany exported goods worth a total of €95.2 billion in November, down from €97.2 billion in October, Destatis said. Imports, on the other hand, rose by 1.6% to €77.6 billion. That means that the seasonally adjusted trade surplus declined to €17.6 billion in November from €20.8 billion in October.
In unadjusted terms, the trade surplus contracted to €17.9 billion from €22.1 billion in October.
‘Today’s data provides further evidence that the Germany economy has not yet fully recovered from the soft spell of the summer. In fact, the German economy still counts its bruises. Nevertheless, in our view, the economy should gain more momentum in the coming months, benefitting from its very special stimulus package, which almost came free. The sharp drop in energy prices and the weaker Euro exchange rate are without any doubt a blessing for the economy,’ said that Carsten Brzeski from ING.
Dire Data from France weakens Euro (EUR) Exchange Rate
Dismal data from France also weighed upon the Euro as it showed that industrial production tumbled for a second consecutive month in November. According to statistical office Insee, industrial production fell by 0.3% in October on a monthly basis and tumbled by -2.6% on an annual basis.
Economists have increased their bets that fourth quarter GDP data will now be negative.
‘Although we expect a recovery in the last month of the year, the entire quarter will remain largely negative. With retail sales also contracting the hard data show that there is a downside risk to our zero growth forecast for the fourth quarter of 2014,’ said Dominque Barbet from BNP Paribas.
Data out of Spain added to the Euro’s woes as business confidence in the nation fell from -5.2 to -6.9 in December.
The Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast
The Pound made gains against UK data showed that the nation is manufacturing production increased more than forecast and the UK trade deficit narrowed broadly. Industrial Production meanwhile held steady in November.