GBP/EUR: Euro Jumps vs. Pound As German Coalition Averts Collapse
  • Pound (GBP) rises on hawkish BoE
  • UK economic calendar is light
  • Euro (EUR) drops after weak German factory orders, EZ investor sentiment
  • German ZEW economic sentiment data tomorrow

The Pound Euro (GBP to EUR) exchange rate is advancing for a second straight day. The pair gained 0.37% on Monday settling at €1.1750, towards he high of the day and recouping a good deal of the losses from the previous week.  At 05:45 UTC, GBP/EUR trades +0.16% at €1.1769.

The Pound charged higher in the previous session after better-than-expected UK construction data and after Bank of England’s Broadbent gave a more hawkish than expected speech.

Activity in the construction industry rose to 55.5 on the construction PMI in November indicating a robust recovery in the sector. A level above 50 indicates expansion.

Looking ahead there is no high impacting UK economic data due to be released today.

Further boosting the Pound was a speech from deputy governor Ben Broadbent, who warned that Britain’s tight labour market will further lift inflation, potentially over 5% by April next year. His comments boosted optimism surrounding an interest rate hike. Recent Omicron developments had dampened expectations of a rate hike in December.

The Euro lost ground after data showed that German factory orders collapsed in October as foreign demand fell. Orders declined 6.9% in October, after seeing a 1.8% increase in September. The figure was well below the 0.5% decline that analysts had expected. Delving deeper into the data, domestic orders rose 3.4% in October, whilst domestic orders dived 3.2%. The data suggests that the German economy had as a slow start to the final quarter of the year.

In addition to weaker factory orders, the Eurozone investor sentiment gauge also fell by morethan expected in December. The data revealed that investor morale dropped to 15.5 its lowest level since April as virus fears reignited across the region and more covid restrictions were imposed.

Looking ahead attention remains on the economic calendar and particularly on Germany with the release of German ZEW economic sentiment reading. The indicator is expected to highlight a steep decline in sentiment amid rising COVID & rising prices.