The Pound Euro (GBP EUR) exchange rate continued to slip this morning following the release of Germany’s latest GDP figures.
EUR investors were upbeat this morning as the Destatis statistics office reported that Europe’s largest economy expanded at a brisk pace at the start of 2017, rising from 0.4% to 0.6% in the first quarter, thanks to strong manufacturing figures driven by an uptick in global trade.
Joshua Mahony, market analyst at IG said;
‘This morning has started in positive fashion for the Eurozone, in what is fast becoming the go-to growth driver of the western world. The outperformance of German Q1 GDP should have come as no surprise given the positive signs coming out of the industrial powerhouse over recent months.’
Germany’s first quarter GDP now outstrips that of all the other major economies, speeding past the UK’s growth figures which slowed to just 0.3%.
Meanwhile the Pound remains pressured by the results of the Bank of England’s (BoE) latest policy meeting as the bank left interest rates unchanged at 0.25%.
Whilst the bank struck a more hawkish tone towards future monetary policy, suggesting that the pace of rate hikes could pick up in the foreseeable future, the caveat that this would be reliant upon a ‘smooth’ Brexit caused GBP EUR to reel.
Sterling sentiment was also pressured by a statement from BoE Governor Mark Carney that said that consumer spending is likely to be squeezed further over the coming year.
Warning that ‘wages won’t keep up with prices’ Carney said that the remainder of 2017 was likely to be ‘a more challenging time for British households’ as the rise of inflation will lead to a real drop in pay for UK households.
The subsequent drop in family spending power also caused the bank to lower its expectations for growth over the coming year, revising its estimate down from 2.0% to 1.9%.
Looking ahead, the GBP EUR exchange rate may mount a recovery next week if the UK latest CPI reading reports that the inflation rate is continuing to hold at a robust pace, with investors hoping that the BoE could be pressured into tightening its monetary policy.
Meanwhile the Euro could be softened on Tuesday if the Eurozone’s latest GDP estimate shows that the bloc’s annualised growth slid from 1.8% to 1.7% as expected.
Current Interbank Exchange Rates
At the time of writing the GBP EUR exchange rate was trending around 1.1836 and the EUR GBP exchange rate was trending around 0.8448.
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