The pound plummeted versus the euro in the previous session, diving to a low of €1.1652 . The pound euro exchange rate closed the session just off the low, down 0.6% at €1.1667 in the fourth straight losing session. The pair is edging higher in early trade on Tuesday.
Dismal UK GDP data sent the pound sharply lower in the previous session. The monthly GDP reading showed the UK economy contracted in November by -0.3%. This was significantly worse than the stagnation that analysts had expected and that had been recorded in October. The manufacturing sector proved to be the biggest drag on the economy, weighed down by Brexit uncertainty and slowing global demand.
PMI readings for December released last week, showed that the manufacturing and construction sectors slipped deeper into contraction in the final month of the year, whist the service sector stagnated. This means that there is a strong possibility that the UK economy contracted across the fourth quarter.
With Brexit uncertainty set to linger, the outlook for the UK economy remains weak. Market participants fear that the UK is heading into recession.
The weak data comes following a more dovish stance from the Bank of England Governor Mark Carney, who hinted that the central bank could loosen monetary policy shortly. The pound dropped on the prospect of lower interest rates.
Today the UK economic calendar is quiet. Investors will look ahead to inflation data on Wednesday.
Trade Deal Signing Optimism Underpins Euro
In the absence of any high impacting data the euro experienced a fairly dull session on Monday. More generally demand for the euro has been mixed.
Recent eurozone data has been showing signs of recovery for the region’s economy. However, some data points remain concerningly weak, particularly those relating to Germany’s manufacturing sector.
The euro has recently received additional support from optimism surrounding the signing of the US – China phase one trade deal. A good deal could help to restore global confidence and demand, aiding exporter Germany’s manufacturing sector out of its current slump.
There is no high impacting eurozone data today. Investors will look ahead to Wednesday’s German GDP reading for further clues as to the health of Europe’s largest economy.
|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 GBP = 1.13990 EUR
Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound
Or, if you were looking at it the other way around:
1 EUR = 0.87271 GBP
In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.