Pound to Euro (GBP/EUR) Today’s Forecast – Exchange Rate to Remain Relatively Static
The Pound to Euro exchange rate was trending between the boundaries of 1.2698 and 1.2759 on Tuesday, with Sterling making steady gains throughout the session. German Industrial Production slipped further than economists’ had forecast in August causing Euro losses. However, Wednesday will be a quiet day for domestic data releases which will leave the GBP to EUR exchange rate reliant on global developments for movement.
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The Eurozone recovery has been faltering in recent months and Germany’s slowdown encouraged a lower Euro on Tuesday. The industrial sector contracted by -4.0% in August, despite forecasts to only shrink by -1.5%.
German figures are highly influential for the Eurozone as a whole as the largest economy in the 18-nations. Forex expert Kathleen Brooks commented: ‘Any time Germany even sneezes the rest of the Eurozone catches a cold, so that’s the primary reason why the Euro is certainly being a bit more flaky.’
Weakening in the German economy has been progressive and now fears for the Euro area to slip into recession are heightening. Italy recently entered its third recession since the onset of the global financial crisis which (as the third-largest economy) has dampened the Eurozone recovery.
Brooks continued: ‘If it [the Eurozone] doesn’t dip into recession, it could probably register a quarter of negative growth.’
Meanwhile, UK Manufacturing Production figures also failed to impress on Tuesday, with only a recorded growth of 0.1% in August. In addition, Industrial Production failed to expand at all, showing a slowdown in the sector after last month’s 0.4% expansion.
However, some believe the recent lethargy in the UK economic recovery could be attributed to the indirect effect of the Russia and Ukraine tensions. Economist Rob Wood commented: ‘UK manufacturing is entering a soft patch as the fallout from events in Ukraine spreads. Ukraine and Russia are of little direct importance to UK exporters. But the manufacturing cycle is highly integrated across countries. That means the decline in business confidence and German manufacturing triggered by Russia’s aggression in eastern Ukraine will continue to spread to the UK over the second half of the year.’
Pound to Euro (GBP/EUR) Exchange Rate Forecast
Wednesday will be a quiet day for data releases for both the UK and Eurozone; however, Thursday will see German Trade Balance figures released alongside the European Central Bank’s (ECB) Monthly Report. Furthermore, the Bank of England (BoE) will announce their latest interest rate decision which, although expected to remain at 0.50%, may see Sterling rise on any hawkish remarks.