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Pound Sterling to Euro Exchange Rate Outlook Influenced by Latest Trade War Fears

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Pound to Euro Exchange Rate Recovers despite Strong German Factory Data

Despite this morning’s German data coming in well above expectations, the Pound Sterling to Euro (GBP/EUR) exchange rate rebounded slightly from the losses it saw yesterday. The Euro (EUR) was unable to hold its best levels against Sterling (GBP) amid trade war fears.

Following last week’s GBP/EUR tumble from 1.1121 to 1.0946, the pair has fallen even lower since markets opened this week.

GBP/EUR touched its worst levels in almost two years overnight – 1.0812 – before rebounding this morning.

At the time of writing, GBP/EUR was seeing decent gains of around half a cent and trended near the level of 1.0870.

The Pound’s (GBP) outlook remains pressured by no-deal Brexit fears, but the Pound to Euro exchange rate could gain if other upcoming German data disappoints.

Pound (GBP) Exchange Rates Rebound from Monday Slump

The Pound saw mixed movement against major currency rivals when markets opened yesterday. It was able to climb against trade-correlated currencies hit by trade war fears, but fell against many others including the Euro.

Sterling tumbled in reaction to weekend comments from UK government officials.

An aide to Prime Minister Boris Johnson, Dominic Cummings, indicated that MPs would not be able to prevent a no-deal Brexit. This caused no-deal Brexit fears to deepen and the Pound fell.

Still, the British currency rebounded a little today. Comments from other MPs suggesting that these comments were misinformed, as well as yesterday’s stronger than expected UK services PMI data, helped Sterling to find some ground to recover.

Euro (EUR) Exchange Rates Fail to Benefit from Factory Stats amid Trade War Fears

Much of the GBP/EUR recovery today was investors rowing back some of yesterday’s sharp losses.

Investors bought the Euro yesterday, as its rivals were sold on geopolitical jitters such as Brexit uncertainties and US-China trade war fears.

The Euro is tumbling against many major currencies today as investors adjust positions, though the currency is still up on the week due to hopes that the Eurozone will not be as strongly affected by US-China trade tensions as other nations.

However, US-China trade fears are weighing on the market’s Eurozone outlook as well.

This morning saw the publication of Germany’s June factory orders stats, which surprised investors by jumping to 2.5% rather than the expected 0.5%.

The data was strong, but was due largely to a jump in bookings for big-ticket items. Germany’s economy ministry said Germany’s key factory sector had not yet reached the turning point markets are hoping for.

This, as well as expectations that US-China trade tensions will continue to negatively impact Germany’s export-focused economy, prevented the Euro from holding its ground today.

Pound to Euro (GBP/EUR) Exchange Rate Recovery May Be Limited as Brexit Dominates Outlook

Rising fears and bets that Britain is headed for a no-deal Brexit are likely to weigh on the Pound to Euro (GBP/EUR) exchange rate’s potential for recovery, as the Pound outlook remains unappealing.

Unless there are any surprising Brexit developments in the coming days, GBP/EUR investors are more likely to focus on upcoming notable Eurozone data.

Key German ecostats from June will keep coming in through the end of the week, including industrial production tomorrow and June trade balance data on Friday.

If the German data shows any stronger signs that Germany’s factory sector is seeing recovery, the Euro could strengthen and push GBP/EUR lower.

However, US-China trade fears are likely to limit the Euro’s potential for gains too due to expectations that they could impact Germany’s trade-heavy economy.

Other data for Pound to Euro (GBP/EUR) exchange rate investors to keep an eye out for includes French trade tomorrow, and French production as well as UK growth stats due on Friday.