The British pound is lower against the euro on Thursday afternoon as the prospects of the European Union playing hardball with the UK in the upcoming trade negotiations weighed on Sterling. The Sterling weakness against the euro came despite particularly poor data out of Germany.
GBP/EUR was lower by 29 pips (-0.24%) at 1.1783 with a daily price range of 1.177 to 1.182 as of 1pm GMT. The currency pair gave up the 1.18 handle early on before stabilising by the afternoon. The loses detract from the narrow +0.12% gains made on Wednesday.
Pound to Euro – Germany factory orders dropped -2.1% over the month
Economic data was not supportive of the euro on Thursday, but the single currency was nonetheless able to sustain its daily gains against the pound. Germany factory orders contracted even more than forecast, falling -2.1% over the month, marking a shocking -8.7% decline from this time last year. The data was so bad that some analysts have referred to it as a low point that Germany should inevitably recover from.
However, it’s not the first time Germany’s factories had feigned a recovery before stuttering again in the past few months. Signs of a rebound in Germany manufacturing had emerged in data for September but quickly slid into contraction for another three months. Tomorrow sees the release of German trade and industrial data, which are expected to be equally bleak. German industrial production is forecast to be declining at a -4% annual rate.
Pound Sterling
With no major economic data from the UK, traders were left feeling downbeat about key UK economic sectors like financial services coming under threat as a result of Brexit. The pound saw a modest rebound though Tuesday and Wednesday but has still not recouped the hammering taken on Monday.
The maiden post-Brexit speech from Prime Minister Boris Johnson on Monday went down like a sack of spuds in financial markets. The Johnson government wants a new ‘Global Britain’ but the short-term reality is that diverging away from European rules and regulations will make doing business with Europe tougher before businesses can recalibrate to other trading partners such as in the Commonwealth.