Pound to Euro: More European Industrial Distress from Italy

• Italian industrial output plummets
• Irish nationalist party’s victory a cause for concern in the UK

The British pound is up against the euro on Monday afternoon after a shock monthly decline in Italian industrial output added to the growing list of disappointing economic data from the Eurozone. Elsewhere shares in Europe and the UK were lower on Monday amid new reported cases of the coronavirus in Britain and France.

GBP/EUR was higher by 36 pips (+0.32%) at 1.1803 with a daily price range of 1.176 to 1.181 as of 1pm GMT. The currency pair pushed higher in early trading before pausing around the 1.18 level. The daily gains eat away slightly from the -1.00% lost over the course of the previous week.

GBP/EUR: Italian industrial output plummets

A lot of the focus has been on the slowdown in Germany but today it was Italy providing evidence of a slowing industrial sector across the rest of Europe too. Italian industrial output fell -2.7% month-over-month when activity was thought to remain flat. On an annual basis, activity is down -4.3%. Italy has a lot of heavy industry and large multinational manufactures located especially in the north. Put together these firms represent 15% of Italy’s Gross Domestic Product (GDP).

The slowdown like in Germany is being attributed more to a slowdown in international demand than domestic, which has remained sluggish for much of the last decade. The fast growth in Italian heavy machine good exports has been to China and South East Asia, precisely the areas under pressure from trade tensions and the coronavirus outbreak.

Irish nationalist party’s victory a cause for concern in the UK

For the British Isles, the main development was in Ireland, where Sinn Féin known for its political support of the IRA during the Troubles in Northern Ireland won a shock populist election victory. The left-wing Irish nationalist party’s victory potentially brings more trouble down the road for Brexit and perhaps for the future of the United Kingdom because of the party’s support for the reunification of the Republic Ireland with Northern Ireland.

The next batch of potentially forex market-moving economic data from the UK arrives tomorrow with a triple whammy of Industrial production, trade balance and fourth-quarter GDP growth. The big one is GDP, where quarterly GDP growth is expected to have stalled to zero.

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