Pound V euro: GBP exchange rate slides as German factory orders soar
THE pound is retreating against the euro again this morning as investors react to some impressive data from Germany. GBP/EUR is currently at around €1.125, sliding around 0.2 per cent from its opening levels this morning to hit a three-week low.
The Bank of England explains the exchange rate
The euro was reacting to the release of Germany’s latest factory order figures. Data published by the Economy Ministry in Berlin revealed order growth rocketed by 3.8 per cent in December, up from a revised -0.1 per cent decline the previous month.
This was much higher than the 0.7 per cent rise that had been forecast by markets and was supported by robust domestic demand and surging global trade.
December’s reading caps off what has been a strong year for Germany’s industrial sector, with workers granted pay increases as firms remain optimistic that this uptrend will continue into 2018.
A note from the Economy Ministry said: “Orders were extremely dynamic in the second half of 2017. Brisk demand from abroad brought full order books and good sentiment in companies. German industry should start strongly into 2018.”
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Orders were extremely dynamic in the second half of 2017
At the same time Sterling sentiment has been dented this morning due to the continued infighting within the Conservative party over how Brexit should be handled.
Prime Minister Theresa May has come under fire from both sides of her party, with Brexiteers claiming that the PM is buckling under pressure from the EU, while Remainers believe that Mrs May is steering the country towards a hard Brexit.
This has even resulted in ex-minister Anna Soubry threatening to quit the Tory party this morning unless the PM does not “get a spine” and deals with what she called “hard ideological Brexiteers” within the party.
With this infighting showing no signs of abating investors are becoming concerned about the state of the UK government and are shying away from the pound on fears that domestic politics could interfere with Brexit negotiations.
Looking ahead, movement in the GBP/EUR exchange rate may become increasingly subdued in the run up to Thursday’s rate decision by the Bank of England as markets wait to see if policymakers will follow other major central banks in adopting a more hawkish outlook for the coming year.
Meanwhile the euro may be forced to cede some ground on Wednesday with the publication of Germany’s latest industrial production figures. Economists forecast that factory output will have declined after a particularly strong November.
