The unexpectedly robust Eurozone industrial production data enabled the euro to rally against the pound yesterday. There were no other major economic data releases. As discussed below, some prominent analysts have issued reports favoring the euro as well. The overall improvement in the euro’s outlook enabled the EUR/GBP pair to rally from a low of 0.8730 to a high of 0.8797 in the past 24 hours.
The Eurozone’s industrial production grew by 0.90% m-o-m in September, following a 2% increase in the prior month, and higher than forecasts of a 0.10% rise.
The data published by Eurostat indicated that the production of non-durable consumer goods grew by 3.60%m-o-m in September. Capital goods recorded an increase of 1.50%. However, intermediate goods and durable consumer goods posted declines of 0.90% and 1.10%, respectively.
On a y-o-y basis, the country’s industrial production surged by 4.90% in September 2022.
Production of capital goods surged 13.50% y-o-y in September 2022. Likewise, non-durable consumer goods posted a growth of 5.70%. Durable consumer goods reported an increase of 3.60%. However, the production of intermediate goods and energy declined by 2.10% and 3%, respectively.
Across the channel, the UK Rightmove House Price Index (HPI), a leading indicator reflecting the change in the asking price of homes for sale, declined by 1.10% in November, following an increase of 0.90% in October.
According to the Conference Board, the UK’s leading index, designed to predict the direction of the country’s economy, fell by 0.90% m-o-m in September to 80, following a decline of 0.60% in the prior month. The indicator is a combination of seven economic indicators linked to production, new orders, consumer confidence, stock prices, and interest rate spreads.
Last week, the UK’s Office for National Statistics stated that the country’s economy contracted by 0.60%m-o-m in September, following a decline of 0.10% in August. The decline was led by poor performance in the services sector. Furthermore, on a q-o-q basis, the UK’s GDP declined by 0.20% in the September 2022 quarter.
In the meanwhile, Alex Kuptsikevich, senior analyst at FxPro, has opined that despite rising energy prices and a steep jump in the ECB interest rate, the Eurozone economic downturn may not be quite as severe as anticipated a few months back.
Interestingly, Derek Halpenny, MUFG’s Chief of Research for Global Markets, has stated that the firm is anticipating underperformance of the pound versus the majority of G10 currencies (excluding the greenback) in the months ahead.
The impressive Eurozone industrial production data, coupled with weak UK economic data and a poor outlook for the currency by analysts, is expected to keep the EUR/GBP pair range-bound with a slight bullish bias in the near future.
The historical price chart indicates that the EUR/GBP pair is rising after testing the support at 0.8730. The next resistance is anticipated only near 0.8830. Additionally, the currency pair is trading above its 50-day moving average while the stochastic indicator is ascending toward the bullish zone. Therefore, we anticipate the currency pair to remain in an uptrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
