Euro gains on Sterling after disappointing UK data

EURGBP extends its gains for the second successive session following the release of key economic data from the UK and Germany, the largest economy in the European Union and the world’s third-largest exporter. The Euro-Sterling cross trades around 0.8280 during the early European hours on Friday.

Data released by the Office for National Statistics reported that the UK Gross Domestic Product contracted 0.1% month-over-month in October, against the expected GDP increase of 0.1%.

Meanwhile, Industrial Production fell 0.6% MoM following a previous decline of 0.5%, against the expected 0.3% rise. The monthly Manufacturing Production declined 0.6% in October, against the expected 0.2% increase and September’s 1% decline.

The British Pound may regain its ground due to the increased likelihood that the Bank of England will adopt a slower pace of policy easing compared to other central banks in Europe and North America.

Germany’s Federal Statistics Office reported a seasonally adjusted trade surplus of €13.4 bln for October, below the expected €16.1 bln and September’s €17.0 bln. During the same period, German exports fell by 2.8%, while imports saw a slight reduction of 0.1%.

On Thursday, the European Central Bank decided to reduce its Rate on Deposit Facility by 25 basis points (bps) to 3.0%, as expected. Similarly, the Main Refinancing Operations Rate was reduced by 25 bps to 3.15%. This was the third straight 25 bps interest rate cut by the ECB in a row and the fourth of the year.

The upside of the Euro could be limited as ECB President Christine Lagarde acknowledged that officials discussed reducing interest rates by 50 bps.

Lagarde said, “risks to growth are tilted to the downside” as “trade friction (with the United States) could weigh on growth.”

(Source: OANDA)