January 14, 2022 – Written by John Cameron
GBP/EUR Trades in Narrow Range Despite Strong UK GDP Figures
The Pound Euro (GBP/EUR) exchange rate is mixed at the beginning of today’s session in spite of the UK’s latest GDP figures printing higher than expected.
At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.1971, with minimal market movement.
Pound (GBP) Directionless Despite GDP Data Exceeding Expectations
The Pound (GBP) is rangebound against the Euro (EUR) at the beginning of today’s session in spite of the UK’s most recent GDP figures overshooting market forecast.
UK GDP data for November accelerated from October’s upwardly revised 0.2%, overshot forecasts of 0.4%, and printed at 0.9%.
Service output grew by 0.7%, with most services increasing by 0.6%, further aided by a 0.8% increase in consumer-facing amenities.
Industrial production expanded by 1% and construction soared to 3.5%.
Supported by health and social work, wholesale and retail trade, and recreational activities, GDP was up by 0.7% – above February 2020 levels for the first time since the pandemic began.
Thomas Pugh, UK Economist at RSM, said:
‘The services sector grew by 0.7% m/m, boosted by stronger retail sales as consumers brought forward some Christmas shopping… Construction output soared, growing by 3.5% m/m as an unusually dry November and easier access to materials allowed firms to ramp up production.’
However, some experts are cautious of the positive data.
Suren Thiru, the head of economics at the British Chambers of Commerce, said:
‘Stronger growth in November is likely to be followed by a modest fall in output in December and January, as consumer caution to socialise and spend, and mounting staff absences sparked by Omicron and plan B limit activity.
‘While the UK economy should rebound once plan B measures are lifted, surging inflation and persistent supply chain disruption may mean that the UK’s economic growth prospects remain under pressure for much of 2022.’
This is weighing on Sterling, and capping the Pound’s potential against the Euro.
Euro (EUR) Muted Despite Meeting German GDP forecasts
The Euro (EUR) is mixed against the Pound (GBP) this morning despite expansion in Europe’s largest economy, Germany.
Germany’s latest GDP figures reported the country’s economy expanded by 2.7% in 2021, following a 4.6% contraction in 2020.
However, the figures are 0.2% lower than pre-pandemic levels due to bottleneck supply issues and coronavirus infection rates.
Meanwhile, government expenditures increased by 3.4% due to free rapid antigen tests and the running of testing and vaccination facilities.
Georg Thiel, president of the Federal Statistical Office, said:
‘Despite the continuing pandemic situation, more delivery bottlenecks and material shortages, the German economy managed to recover from the sharp fall last year although the economic performance has not yet reached its pre-crisis level again.’
GBP/EUR Exchange Rate Forecast: Will ECB President Speech Boost EUR?
Looking ahead, the Pound Euro (GBP/EUR) exchange rate is likely to be influenced by ongoing coronavirus developments for the rest of today’s session in the absence of any notable data.
This afternoon, the single currency may be impacted by a speech from Christine Lagarde, European Central Bank’s President, with EUR investors eager for her to address the recent surge in Eurozone inflation
Next week, EUR may be bolstered by the release of final figures for Germany’s inflation rate in December, forecast to increase from -0.2% to 0.5%.
Sterling may be impacted by media headlines today as the political position of the UK remains uncertain as many MP’s call for Boris Johnson to resign as Prime Minister.
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TAGS: Pound Euro Forecasts