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EUR Strengthened by Widening German Trade Surplus

Yesterday’s high: €1.1330

Yesterday’s low: €1.1261

GBP/EUR Falls Further Amidst Cabinet Chaos

Germany’s trade surplus widened further than forecast from 20.1 billion to 24.1 billion in September, highlighting the continued strength of the Eurozone’s powerhouse economy.

This was fuelled by a smaller-than-expected contraction in export volumes, indicating that German products remain in high demand.

Naturally this offered a boost to the Euro on Thursday, especially as the attitude towards the US Dollar soured.

The optimistic mood was echoed by the latest European Commission Eurozone growth forecasts, which were revised up from 1.7% to 2.2% for 2017.

As this would be the strongest growth the domestic economy had seen in a decade, the single currency made further gains on the back of the news.

On the other hand, the Commission cut its forecast for UK growth over the same period, even on the basis of a transitional Brexit deal being agreed imminently.

This weighed on the GBP/EUR exchange rate, which was already rattled as a result of the growing sense of chaos surrounding Theresa May’s cabinet this week.

Euro Outlook: More Dovish Draghi Rhetoric Anticipated

With Eurozone data thin on the ground today, the GBP/EUR exchange rate could soon recover some of its losses.

Confidence in the Euro is also likely to be a little limited ahead of tomorrow’s speech from European Central Bank (ECB) President Mario Draghi.

As Draghi looks set to maintain a more dovish outlook on monetary policy for the time being, his comments could easily dent the single currency.

Support for the Pound could strengthen, meanwhile, if the UK visible trade deficit is found to have narrowed in September.

Any easing in the economy’s exposure to a deterioration in trade conditions may encourage greater confidence in Sterling, potentially diminishing the impact of a hard Brexit.

The GBP/EUR exchange rate could also benefit from a positive NIESR gross domestic product estimate for the three months to October.

Key Events

10th November

09:30 UK Visible Trade Balance

13:00 NIESR Gross Domestic Product Estimate

11th November

10:00 ECB President Draghi Speaks in Milan

 

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To keep up to date with the Euro, visit the Euro blog in our Currency News section.

Alastair Archbold

Currency Dealer

T: (0) 1442 892 066

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