EURGBP continues to rise for the second consecutive session following the release of key economic data from the United Kingdom and Germany, the European Union’s largest economy and the world’s third largest exporter. The euro-sterling cross traded around 0.8280 in the early hours of the European session on Friday, Financial Monitor reports.
The Office for National Statistics released data that UK gross domestic product contracted 0.1 per cent month-on-month in October against an expected 0.1 per cent GDP increase.
Meanwhile, industrial production fell 0.6 per cent month-on-month after a previous decline of 0.5 per cent, against an expected rise of 0.3 per cent. Monthly manufacturing output fell 0.6% in October, against an expected 0.2% rise and September’s 1% decline.
The British pound may recover due to the increased likelihood that the Bank of England will adopt a slower pace of policy easing than other central banks in Europe and North America.
Germany’s Federal Statistical Office reported a seasonally adjusted trade surplus of €13.4bn for October, down from an expected €16.1bn and €17.0bn in September. Over the same period, German exports fell 2.8 per cent and imports fell marginally by 0.1 per cent.
On Thursday, the European Central Bank decided to cut its deposit rate by 25 basis points (bps). Similarly, the main refinancing operations rate was cut by 25 basis points to 3.15%. This was the ECB’s third consecutive 25 bps interest rate cut and the fourth this year.
The euro’s rise may be limited as ECB President Christine Lagarde admitted that officials had discussed the possibility of a 50bp cut in interest rates.
Lagarde said “risks to growth are tilted to the downside as trade frictions (with the US) could weigh on growth.”
