The Pound (GBP) exchange rate edged higher against the Euro (EUR) on Friday after economic data showed that the UK economy expanded in line with economist expectations.
According to the Office for National Statistics, economic growth in the UK slowed in the third quarter to expand by 0.7%, down from the previous quarters reading of 0.9%, a figure, which was expected by economists and by the Bank of England.
The data showed that all four key sectors of the UK economy continued to grow with the dominant services sector expanding by 0,7%, Industrial production expanded by 0.5%, Construction output rose by 0.8% and agriculture expanded by 0.3%.
On a year on year basis, the UK economy expanded by 3% meaning that the pace of growth has outpaced the country’s main rivals in Europe. The French economy has not seen growth for six months and Germany is forecast to see its expansion rate slow markedly as concerns over Ukraine and the slowdown in the wider Eurozone weigh upon sentiment and output.
The report also shows that the UK economy is now 3.4% higher than its previous pre-crisis peak achieved in the autumn of 2008, before the global financial crisis hit.
Further gains for Sterling were likely to be restrained as the data was widely expected by the markets.
The Euro received some support earlier in the session after a report showed that consumer confidence in Germany is likely to rebound next month, raising hopes that the region’s largest economy will not slide into recession by the end of the year.
The monthly survey compiled by the GfK market research group shows that consumer confidence in Germany is set to rise to 8.5 points in November, up from the 8.4 recorded in October.
‘In October, German consumers were evidently less affected by the continued problematic geopolitical situation and the resultant economic slowdown that they had been in the previous month,’ GfK said.
Gains for the single currency were restrained however, as data out of Italy showed that Retail Sales fell unexpectedly in August. On a monthly basis retail sales declined by -0.1%, a figure worse than the 0.2% increase forecast by traders. On a yearly basis sales fell by -3.1% from -1.5% and was a lot worse than the -0.9% fall expected.
Pound to Euro Exchange Rate Forecast
The Pound could make strong gains against the Euro over the weekend if Sunday’s Eurozone bank stress test results show that a number of the regions banks will require a bailout.
The European Central Bank is expected to fail a few financial institutions. Depending on the outcome of the ECB audit, we could see the Euro weaken substantially.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,US Dollar,1.2654 ,
Euro,, Pound Sterling,0.7877 ,
Euro,,Australian Dollar,1.4420 ,
Euro,,Canadian Dollar,1.4191 ,
Pound Sterling,,Euro,1.2690 ,
US Dollar,,Euro,0.7901 ,
[/table]
