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Euro Keeps Pound Under Pressure, GBP/EUR Hits 3-Week Low

Friday’s high: €1.1194

Friday’s low: €1.1118

German Data Boosts Euro Exchange Rates

The Euro maintained its lead over the majors on Friday following some extremely positive German factory order figures.

Month-on-month factory orders in Germany increased a whopping 3.6% in August, smashing the forecast of 0.7% growth and beating the previous period’s -0.4% contraction.

The annual figure proved even more promising by rising 7.8%, up from the 4.7% forecast and the previous period’s 5.4% increase.

This was the sharpest rise recorded in 2017, indicating solid domestic and foreign demand and highlighting the strength of the Eurozone’s largest economy.

The Pound Euro exchange rate continued its decline on Friday as discussions regarding a potential leadership challenge within the Conservative Party reached fever pitch.

UK Prime Minister Theresa May has faced on going criticism from both inside and outside of her party since the 2017 General Election that resulted in a loss of seats and hung parliament.

This culminated in previous Tory Chairman, Grant Shapps, stepping forward and claiming that 30 Tory MP’s want May out and someone new in – although according to Shapps they aren’t entirely decided on who.

‘A growing number of my colleagues realise the solution is not to bury our heads in the sand and hope it will get better’. Shapps stated, continuing:

‘This is not about promoting an individual. It’s about having a proper and full leadership election and that should go out to party members as well’.

Despite various politicians running to defend Theresa May, and indeed assurances from the PM herself, this news still hurt demand for the Pound – providing fertile soil for the Euro to continue to capitalise.

On the data front, UK productivity in Q2 was revealed to have inched lower on Friday by 0.1%. This followed the 0.5% decline in Q1 and represents an ongoing productivity issue that has plagued the UK since the financial crisis.

Euro Outlook: EUR German Industrial Production, Trade Balance & US Fed Minutes

The Euro could become volatile this week depending on the outcome of the German industrial production figures (due Monday) the German trade balance (due Tuesday) and the US FOMC meeting minutes (due Wednesday).

German data has consistently proven positive of late – if this continues with the region’s industrial production and trade balance figures, the Euro will climb even higher.

If, however, the FOMC meeting minutes reveal that the Federal Reserve is still on track for a rate hike in two months then the Euro could come under significant pressure.

Markets will also be keeping an eye on Thursday’s speech from European Central Bank Governor Mario Draghi, and Fed Lael Brainard, both of whom are due to speak at a monetary policy panel.

Lael is typically dovish, though market bets for a Fed rate hike still sit at 75%.

 

Key Events

Week Starting October 9th

Mon, 06:00 German Industrial Production

Tues, 06:00 German Trade Balance

Wed, 18:00 US FOMC Meeting Minutes

Thurs, 14:15 US Fed Brainard and ECB Draghi Speak on Monetary Policy

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

Thomas Taylor

Currency Dealer

T: (0) 1442 892 074

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