- Pound (GBP) falls on Friday & across the week
- UK GDP contracts -0.1 % MoM in January
- Euro (EUR) rises despite the US – EU trade war
- German Chancellor warns of a recession
The Pound Euro (GBP/EUR) exchange is falling after two days of gains. The pair rose 0.22% in the previous session, settling on Thursday at €1.1928. It traded in a range between €1.1896 and €1.1945. At 16:30 UTC, GBP/EUR is trading -0.43% at €1.1877. The pair is set to fall across the week, the second straight weekly decline.
The pound is falling as the UK economy unexpectedly shrank in January. According to data from the Office of National Statistics, the UK GDP shrank 0.1% month over month at the start of the year, mainly due to contraction in the production sector.
The service sector saw an increase in activity of 0.1% in January; however, this was a slowdown from the 0.4% increase in December.
The data will be disappointing for Chancellor Rachel Reeves, who will announce her spring statement on March 26. This comes following the autumn budget, when the chancellor announced an increase in the employer burden for National Insurance tax, which will come into effect next month.
The data comes ahead of the Bank of England interest rate decision next week where the central bank is expected to keep rates unchanged at 4.5%
The euro is rising despite ongoing concerns over Trump’s trade tariffs and after German inflation cooled in February.
Joachim Nagel, the head of the German central bank, warned that the latest developments in the trade tariff war between the US and the EU could plunge the German economy into another recession.
The German economy, the largest in the eurozone, has struggled in the wake of the COVID-19 pandemic, suffering contractions over the past two years. Nagel warned that the country could see another recession this year if US tariffs hit the German manufacturing sector. His comments come after data from Germany showed that inflation cooled to 2.3% in February.