The exchange rate range between GBP and EUR tightened as German auto markets struggled to acquire key parts
The euro-pound exchange rate remained stable this morning as German automakers struggled to acquire key parts. As a result, Eurozone markets are increasingly concerned about the economic outlook. The pair is currently trading around € 1.15.
The euro could not gain against the pound after it had recorded a decline in the German economy of -1.7% in the Covid 19 crisis last week.
The recovery of the eurozone’s largest economy was hampered by a third wave of viruses in the first quarter of 2021.
The Institute for Economic Research (IFO) also reported that less than 14% of German automakers said lack of demand had become a problem.
“The main problem right now is the problems with intermediates, which have been reported by 60.4% of companies.
“That figure is only 5.8% in July 2020; in April 2020 it reached 42.0%. Several car factories have now announced that they will introduce short-term work due to the lack of silicon chips.
As a result, euro investors are becoming increasingly cautious about the euro area’s economic recovery in the months ahead.
The pound exchange rate will rise as UK factory activity picks up in April
The pound (GBP) was up against the single currency following today’s April manufacturing PMI release. The number exceeded expectations, falling from 60.7 to 60.9.
Markit, the company that compiled the survey, said strong customer confidence had strengthened the UK’s manufacturing sector over the past month. Markit explains:
“In April production output rose for the eleventh time in a row.
“The growth in production has been attributed to easing foreclosure restrictions, improved demand, and an increase in backlog. Strong and accelerated production expansions were observed in the consumer goods, intermediates and capital goods sectors, with the consumer goods category performing the best overall. “
As a result, sterling (GBP) traders have become more confident about the outlook for the UK economy, especially as Covid-19 infection rates remain relatively low.
Professor Neil Ferguson, epidemiologist at Imperial College London and senior government advisor, also said he was “optimistic about the family that we will not go back to normal, but something that appears to be much more normal by the summer”.
Mr. Ferguson added that “the data is very encouraging and very much in line with our expectations”.
Pound exchange rate outlook: Eurozone PMI data at a glance
Euro (EUR) investors are waiting for tomorrow’s April composite PMI release.
Any sign of an improvement in the outlook for the euro area economy could support the EUR / GBP exchange rate.
Germany’s latest April composite PMI figure will also be released tomorrow. If this shows a recovery in the eurozone’s economic strength, the single currency could make up some of its losses.
The euro-pound exchange rate could rise this week if the UK’s Covid-19 cases continue to fall and optimism about the country’s economic recovery increases.