- Pound (GBP) advances despite downward revision to GDP by NIESR
- Quiet economic calendar until Q4 GDP data on Friday
- Euro (EUR) holds steady despite weak German industrial output & EZ investors confidence
- German trade data could provide fresh impetus
The Pound Euro (GBP/EUR) exchange rate is trading a few pips higher on Tuesday. The pair settled pretty much flat at €1.1402 on Monday, just 12 pips off the high of the day in a relatively subdued session. At 05:15 UTC, GBP/EUR trades +0.05% at €1.1408.
According to the National Institute of Economic and Social Research (NIESR) think tank the British economy will grow by 3.4% in 2021 after contracting 10% in 2020. The NIESR had previously forecast 5.9% growth this year. However, the downward revision came as a reflection of the impact that the latest lockdown is expected to have on the economy. Meanwhile the think tank only sees the UK returning to pre-pandemic growth in 2023 amid higher unemployment, weaker business investment and a more restricted trading relationship with the EU.
This was a more downbeat outlook than that put forward by the Bank of England, which said last week that it expected the UK to return to pre-pandemic growth by the first quarter of next year.
The UK economic calendar is light again today, and remains light until the end of the week when the fourth quarter GDP reading will be released.
The Euro was well matched to the Pound in the previous session despite German Industrial production stagnating in December. German industrial output failed to grow fort he first time in eight months in December, adding to signs that the Eurozone’s largest economy is being weakened by the resurgence of covid. Output slowed to 0% below the 0.3% expansion that analysts had forecast.
Eurozone sentix investors confidence also disappointed, unexpectedly weakening to -0.2 in February, significantly worse than the 4.1 that was expected. The slow pace of the vaccine rollout was blamed for weighing on confidence and exposing bureaucratic deficits in the region.
Looking ahead, the German trade balance, import and export data could provide some fresh impetus for the Euro.