The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened on Wednesday as German factory orders and Eurozone retail sales data disappointed.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a session high of 1.3737
An unexpected decline in German factory orders put the Euro under pressure early on in the session as the report showed that the Eurozone’s largest economy remains vulnerable.
According to the report published by the Economy Ministry, orders for German made goods fell by -0.9% in February, a figure that was well below economist expectations for a rise of 1.5%.
Domestic orders remained unchanged from the previous month, while foreign demand decreased by 1.6%. New orders from the euro area dropped 2.1% but those from other countries declined 1.3%.
‘Due to weak bulk orders, demand was significantly weaker in the first two months of the year. At the same time, sentiment indicators are sending positive signals. Overall, the trend in the industry should continue to point moderately upward,’ said the ministry in a statement.
The decline in orders was the second consecutive monthly drop and added to the sharp fall recorded in January. That month’s figure was also revised from -3.9% to -2.6%, and was the biggest decline seen since August 2014.
Eurozone retail sales also fell in February, adding to concerns that the wider Eurozone economy remains weak.
According to Eurostat, retail sales decreased by -0.2% in February on a monthly basis. On an annual basis, sales were up by 3% due to the strong performance seen in September. The figures matched economist forecasts.
UK Data Supports Pound Sterling (GBP) Exchange Rate
The Pound Sterling meanwhile continued to receive support from Tuesday’s better-than-forecast Services PMI report. Today, the currency strengthened as a report showed that new car sales in the UK surged to a record high in March. 492,774 new cars were sold to make last month the best since 1999.
‘We expect a more stable market over the year ahead. The fundamentals are still there: there’s still economic confidence, there’s still relatively low interest rates which makes for cheap finance packages… and there’s lots of new technology in the cars,’ said Mike Hawes, chief executive at the UK Society of Motor Manufacturers and Traders.
With vehicle sales being a major indicator of how well a nation’s economy is performing, the data will add to the already high optimism around the UK economy. With the general election coming up the positive data could prove to be a boon for the Conservatives.
The Pound could make more gains on Thursday if the latest UK Balance of Trade data comes in positively. Also in focus will be the Bank of England’s interest rate announcement and Halifax house price data.
