GBP/EUR: Pound Steady vs. Euro As Angela Merkel Steps Down

Concerns over the health of the German economy and US — China trade headlines sent the euro US dollar exchange rate tumbling lower across the previous week. The pair dropped over 1.3%, closing the week at US$1.1018, its lowest level in almost a month. The pair is advancing in early trade on Monday.

Let’s take a look at the factors that have been driving the pound US dollar exchange rate across the week.

Eurozone data was broadly encouraging across the previous week. However, manufacturing in the bloc remains firmly in contraction. The services index for the eurozone improved, although German’s PMI remained below 50, the level which separates expansion from contraction.

Industrial Production in Germany was notably poor. Furthermore, the European Commission slashed growth forecasts for the bloc for this year and next. The negative data overshadowed the stronger PMI’s.

With fears over the health of the German economy front and central for euro investors, all eyes will be on German GDP data later this week. The German economy contracted in the second quarter. Market participants fear that it contracted again in the third quarter. Two consecutive quarters of contraction make a technical recession.

Should Europe’s largest economy fall into recession, concerns of contagion could spread. Furthermore, investors could expect the European Central Bank to ease monetary policy further to support the economy, potentially dragging the euro lower.

The euro has barely flinched at the Spanish election. This shows that investors are not concerned about political instability in Madrid.

Trade Headlines Remain Key

The US dollar trended higher across the previous week. Stronger than forecast US services sector data quelled concerns over the health of the US economy, pushing back Fed cut bets. The US manufacturing sector is experiencing a slump amid the ongoing US — Sino trade war. However, data is showing that the slump is not spilling over into the dominant service sector.

US — China trade headlines also drove the US dollar higher. Whilst the headlines continue to be two steps forward one step back, overall, they were positive, sending US stock markets to all time high’s. Reports indicated that the two powers are inching towards the signing off a first phase trade deal, which could include the rolling back of already implemented trade tariffs. The prospect of a deal lifted the dollar. Traded headlines will remain key again this week.

In addition to trade, investors will be watching US inflation data and Fed Chair Powell’s testimony before Congress on Wednesday and Thursday.


What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 EUR = 1.12829 USD

Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.

Or, if you were looking at it the other way around:

1 USD = 0.88789 EUR

In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar. is a news site only and not a currency trading platform. is a site operated by TransferWise Inc. (“We”, “Us”), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on do not represent our views.