Euro Sterling Exchange Rate Lower as Eurozone GDP Confirmed at 0.4 Percent
It was good news from those changing their travel money from GBP to Euro, as a late rally in the British Pound saw the Euro Sterling Exchange Rate close lower on Friday, ending the day with a 0.50 percent gain, valuing the EUR/GBP at 0.8944.
Having started the day with moderate gains, the Euro plummeted around lunchtime, shortly after the release of weak Eurozone second quarter GDP figures. EU statistics agency Eurostat confirmed on Friday, that the Eurozone economy expanded by 0.4 percent in Q2. The 19-member country economy grew 0.4 percent on a quarterly basis as investment in business increased sharply whilst net trade remained negative. Eurostat also revised its yearly figure from the initial 2.2 percent, down to 2.1 percent.
The strongest economies in the Eurozone for the 2nd quarter were Malta, Estonia and Slovakia who recorded growth of 1.9 percent, 1.4 percent and 1.1 percent respectively. The weakest performances were recorded by France, Greece and Italy, who all posted just 0.2 percent growth in Q2. What worried markets and sent the Euro lower was the poor performance of Germany. The world’s fourth largest economy, and Europe’s largest economy, expanded by just 0.5 percent during the quarter which raised concerns amongst investors.
The EU project is very much reliant on German economic stability and success. The German economy is the engine room for the European Union and without its economic strength, there are serious reservations over whether the European Union could continue.
Holiday makers and travelers to Europe enjoyed a second day of being able to get a better value Euro Sterling Exchange Rate for their travel money. It has not been a great time for those travelling from the United Kingdom into the European Union. Travelling expenses and purchasing travel money has been an expensive endeavor for Brits over the summer as the Euro Sterling Exchange Rate has enjoyed a summer of gains, making it more expensive for British holiday goers and travelers. Despite political chaos in Italy and a soft set of economic results from the European powerhouse – Germany – the Euro has enjoyed a strong summer over the British Pound.
Keeping Sterling in check and making British holidays abroad more expensive has been a succession of weak data releases from the world’s fifth largest economy. Meanwhile, continued uncertainty over Brexit (British exit from the European Union) has kept the British economy subdued and forced the Bank of England’s, the UK’s central bank, to raise interest rates from their historic low of 0.50 percent to 0.75 percent in August. However, the raise in rates has not yet had the desired effect of boosting the GBP, as most banks and building societies have yet to pass the interest rate raise on to the consumer.
For two days now travel money has been that little less expensive to buy, but overall the trend has been very negative for the British Pound and there is growing talk of the BoE raising interest rates at least one more time before the year is out, which should provide a boost the gbp to euro exchange rate and make holidays and travel into the European a cheaper and more affordable venture than it is currently.