Pound Euro Exchange Rate News: GBP/EUR Climbed Higher amid Growing UK Economy

January 13, 2023 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Climbed Higher amid Growing UK Economy

Pound (GBP) Buoyed by Surprising Boost in GDP Growth

The Pound (GBP) enjoyed a rare boost on Friday as GDP growth beat forecasts and posted a surprising expansion in November. Against an expected shrinking of 0.2%, the UK’s economy surprised everyone and grew by 0.1%.

Boosted by the World Cup taking place in winter rather than its usual summer spot, both bars and shops saw an increase in consumer spending. But offsetting most of that boost was a downbeat manufacturing sector. The struggling industry teetered on the edge of a recession as the sector saw a 0.3% contraction in the three months leading to November.

However, despite growing as opposed to shrinking, the unexpected gain could now mean the economy would have to shrink by 0.5% in December to fall in line with forecasts of a declining GDP in Q4. But with forecasts of the UK’s output to decline by 1.4% in 2023, Ed Monk, Associate Director at Fidelity International, said of the situation:

‘The UK economy is doing its best to avoid falling into a technical recession with another month of growth in November. (However), it doesn't change the fact that it is likely to be an extremely painful year for the economy.’

Euro (EUR) Quiet Despite Modestly Positive Data

Meanwhile, the Euro (EUR) struggled to gather much strength on Friday in the wake of moderately positive economic data.

Full year GDP growth in Germany marginally exceeded expectations and grew 1.9% compared to a predicted 1.8%. Economic output stagnated in Europe’s largest economy in the final quarter of 2022, but still grew over the full year. Investors will be buoyed at the prospect that Germany’s economy could avoid a recession, at least for winter. Economy Minister Robert Habeck was hopeful that the economic slowdown could be shorter and milder than expected.

Elsewhere, industrial production in the Eurozone climbed 1% MoM in November, exceeding expectations of a 0.5% jump. Rebounding from a disappointing 1.9% fall in October, the industrial sector recorded the best performance in three months.

GBP/EUR Exchange Rate Forecast: Domestic Woes to Drag Sterling Back Down?

Looking ahead to next week’s session, the Pound Euro exchange rate could see further movement from external factors amid a lack of major economic data. Domestic woes in the UK are unlikely to inspire much confidence in investors and could see the Pound slip once more.

Mounting industrial action could see the impact stretch to the GDP growth figure for December. Analysts warn that the wave of strikes could weaken the economy enough to signal a technical recession in the UK.

Developments in the Ukraine conflict could influence the Euro. Any further negative headlines in relation to Russia’s claims to controlling the salt-mining town of Soledar could bring moods down.

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TAGS: Pound Euro Forecasts