Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as German Industrial Production Stumbles
The Pound Sterling Euro (GBP/EUR) exchange rate remained largely flat on Friday, giving up some previous losses. The pairing is currently trading at around €1.1830.
The single currency remained under pressure as data revealed the slump in German factory output could drag on the wider economy.
Industrial production in the bloc’s largest economy disappointed at the start of the fourth quarter. Month-on-month, production plummeted by -1.7% after September’s fall of -0.6%.
Commenting on this, ING’s Carsten Brzeski noted:
‘Today’s data suggests that the German economy is continuing to flirt with stagnation and contraction in the final quarter of the year.
‘Looking ahead, both soft and hard indicators bode ill for industrial activity in the months ahead […] Trade conflicts, global uncertainty and disruption in the automotive industry have put the entire German industry in a headlock, from which it is hard to escape.’
Sterling (GBP) Edges Lower After Three-Day Rally
On Friday, after a three-day rally, the Pound edged lower against a handful of currencies.
While the currency edged lower at the end of the week, GBP was still headed for its best week since mid-October.
The Pound Euro (GBP/EUR) exchange rate hit a two-and-a-half year high on Thursday as Brexit optimism sparked a rally.
This week opinion polls have revealed support for the Conservatives has grown, increasing the likelihood the party will win an outright majority in next week’s election.
If Boris Johnson’s party secures a majority it will allow the PM to take the UK out of the EU by the January deadline.
Commenting on the recent opinion polls, Morten Lund, Nordea analyst noted:
‘It’s a small move and no fundamental change [in terms of what opinion polls show].
‘From a risk-reward perspective most people are too optimistic but if you look at option markets you can see some people positioning for Sterling weakness.’
Markets remained optimistic that a Tory win would see more than three years of Brexit uncertainty come to an end.
However, even if the Conservatives win a majority, some analysts have argued that any further GBP gains will be limited.
Pound Euro Outlook: Will Election Optimism Buoy GBP?
Looking ahead to next week, the Pound (GBP) could edge higher against the Euro (EUR) if there are further polls suggesting the Conservatives will win Thursday’s election.
If markets continue to remain optimistic that Boris Johnson will secure a majority, Sterling sentiment will increase.
Meanwhile, the single currency could slide if Germany’s trade balance disappoints, and October’s exports slump.
If both imports and exports fall in October, the Pound Euro (GBP/EUR) exchanger rate could edge higher.