Wider-Than-Expected UK Trade Deficit Ploughs Pound (GBP) into Negative Territory
UK had the lowest level of exports for five months in November, with a £500 million drop on the previous month’s figures. Imports also fell, mainly thanks to a slow in demand for oil, which did shrink the deficit marginally, although not by as much as analysts had predicted. The goods trade deficit between Britain and the EU hit a record high as the strength of Pound Sterling continued to quash demand for UK goods in the currency bloc.
German Industrial Production Figures Post Shock Slowdown
German Industrial Production has posted growth of just 0.1% year-on-year (YoY) for November, falling at a seasonally adjusted rate of -0.3% month-on-month (MoM) instead of rising to 0.5% as forecast. Exports also disappointed forecasts, rising out of contraction but undershooting the estimated growth by 0.1%. Imports, however, accelerated to 1.6% after a -3.2% fall the previous month.
The news, coupled with trader profit-taking on a strong Euro after yesterday’s bullish European session, has allowed Pound Sterling to advance.
Yesterday…
Global Stock Markets React to Early Chinese Closure
World stock markets have remained bearish today in the wake of continuing concerns over the Chinese market. £40 billion has been wiped from the FTSE100 index, with companies in the mining and commodities sectors hit the hardest. Chinese stock markets had to be closed early again today after another mass sell-off triggered the ‘circuit breaker’ mechanism for a second time this week.
There are already rumours that the Chinese authorities may scrap the ‘circuit breaker’ mechanism, less than a week after it was first introduced. As a result of the mechanism and the -7% loss threshold, Chinese stock markets were open for less than an hour today, with the breaker activated after just 14 minutes.
Earlier…
The text of a speech due to be given later by Chancellor of the Exchequer George Osborne, in which he will warn of multiple threats to the UK economy, has driven the GBP/EUR exchange rate deep into negative territory. The Euro is making significant advances, boosted by a surprise fall in unemployment, positive business sentiment and a strong performance from Markit PMIs.
GBP/EUR Exchange Rate Falls as Osborne Confirms More Spending Cuts in Future
The UK must push on with spending cuts in order to reduce the deficit, according to the text of a speech George Osborne will give in Cardiff today. Warning that calling for additional spending in an attempt to stimulate the economy could undo all progress made to date, the Chancellor will state that ‘Anyone who thinks it’s mission accomplished with the British economy is making a grave mistake.’
The Chinese economy and tensions in the Middle East are just two of the ingredients in what Mr Osborne refers to as a ‘cocktail of threats’ to the UK economy. Many economists already believe 2016 will be a tough year for Pound Sterling, with claims overvaluation is stifling the export market, low inflation and uncertainty over Bank of England (BoE) monetary policy likely to weigh heavily on the currency.
As the Chancellor has pointed out, ‘We are only seven days into the New Year, and already we’ve had worrying news about stock market falls around the world, the slowdown in China, deep problems in Brazil and in Russia.’
The GBP/EUR exchange rate is currently trading around 1.3425.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Soars Following Positive Eurozone Data
The Euro has extended its bullish run against major currencies today following a raft of positive data. Although retail sales in the Eurozone fell between October and November, Markit Retail PMIs for Germany and Italy edged back into positive territory, showing mild growth in the sector. Germany’s Construction PMI also performed well, rising from 52.5 to 55.5.
Among the headline figures was the Eurozone unemployment figures, which dropped unexpectedly from 10.7% to a more-than four-year low of 10.5%. While the Consumer Confidence index edged further into negative territory, Economic Confidence rose against predictions from 106.1 to 106.8, while Services Confidence increased marginally from 12.8 to 13. Industrial Confidence edged further towards positive territory, rising from -3.2 to -2.
The EUR/GBP exchange rate is currently trending up 1.2% and trading between 0.7361 and 0.7460.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Trade Data Predicted to Spark Volatility
Both the UK and Germany will release trade figures tomorrow, which could spark volatility in the GBP/EUR exchange rate with both sets of figures predicted to print positively. The UK Trade Balance is expected to fall from -£4140 million to -£2700 million, while the German Trade Balance surplus is expected to contract down to €20.2 billion from €22.3 billion.
The GBP/EUR exchange rate is currently trading between 1.3394 and 1.3580.
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