This followed yesterday’s declining German factory figures which painted a grim picture of the Eurozone’s powerhouse economy. Today also saw the euro sink on renewed demand for the US dollar, with traders optimistic that the US and China will forge ahead with their “Phase One” trade deal this month. The positive outlook comes after reports Washington will slash tariffs on $110 billion of Chinese imports.
In European economic data, today saw the Eurozone producer price index figure for September confirm forecasts and ease by -1.2 percent, leaving euro traders increasingly concerned for the health of the union bloc.
Meanwhile, the pound edged higher against the single currency after the UK’s BRC Like-For-Like Retail Sales figure for October rose by 0.1 percent on the year, a result of high street stores offering hefty discounts in an effort to encourage consumer confidence.
Helen Dickinson, Chief Executive of the British Retail Consortium, was downbeat, commenting: “Unfortunately, the longer term trend remains bleak with the 12 month average sales growth falling to a new low of just 0.1 [percent].”
“With Brexit still unresolved and a December election creating new uncertainties, retailers will be looking nervously at the months ahead.”
Sterling managed to hold on to its gains against the euro despite today’s UK Services PMI for October failing to clamber out of contraction territory.
Chris Williamson, Chief Business Economist at the IHS Markit, said: “The UK PMI surveys collectively indicated a further overall decline in private sector output in October. Contractions have now been recorded in four of the past five months, marking the worst spell since 2009 during the global financial crisis.”
We could see the pound to euro exchange rate edge higher tomorrow if German factory orders for September show any signs of deterioration. This would further exacerbate fears for a near term recession in the Eurozone’s largest economy and weigh heavily on the single currency.