Pound-Euro Steady as Weak German Factory Orders Weigh on EUR

– Written by


David Woodsmith

STORY LINK Pound-Euro Steady as Weak German Factory Orders Weigh on EUR

The Pound to Euro (GBP/EUR) exchange rate struggled to find clear direction at the beginning of the week as investors assessed the latest economic figures from Germany.

At the time of writing, the GBP/EUR exchange rate was trading at approximately €1.1575, little changed from Monday’s opening levels.

The Euro (EUR) traded without conviction on Monday following the release of Germany’s latest factory orders report, which painted a weaker-than-expected picture of industrial demand.

Figures from Destatis showed orders fell by 3.8% in April, reversing March’s revised 4.5% increase and significantly undershooting forecasts for a more modest 1.2% decline.

The sharp deterioration suggested manufacturers faced a broad-based slowdown, with both domestic and international demand softening during the month.

The data added to concerns that Germany’s industrial sector is losing momentum amid ongoing geopolitical uncertainty and elevated energy costs, raising the risk that the Eurozone’s largest economy could struggle to generate growth in the second quarter.

The Pound (GBP) also found it difficult to gain traction on Monday as UK borrowing costs continued to trend higher.

The yield on the benchmark 10-year gilt approached 5%, reaching its highest level in more than a fortnight as investors reacted to rising energy prices and expectations that interest rates may remain elevated globally for longer.

Near-Term GBP/EUR Forecast: German Industrial Output Data in Focus

Looking ahead, Germany’s upcoming industrial production figures are likely to provide the next notable driver for the Pound to Euro (GBP/EUR) exchange rate.

Another disappointing release could place additional pressure on the single currency by reinforcing concerns over the health of Germany’s manufacturing sector.

That said, volatility in the Euro may be restrained as investors remain cautious ahead of the European Central Bank’s (ECB) upcoming interest rate decision, preferring to wait for clearer guidance from policymakers.

Meanwhile, with little in the way of major UK economic releases before Friday’s GDP figures, Sterling may continue to take its cues from broader market sentiment and movements in global bond markets.

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