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- EUR/GBP loses ground to near 0.8650 in Friday’s early European session.
- German Industrial Production falls 0.7% MoM in March, weaker than expected.
- BoE’s Bailey warned of “forceful tightening” if energy price shocks from the Middle East conflict continue to drive inflation.
The EUR/GBP cross holds losses around 0.8650 during the early European session on Friday. The Euro (EUR) softens against the Pound Sterling (GBP) on the downbeat German economic data. Traders brace for the speeches from the European Central Bank policymakers later on Friday, including Christine Lagarde, Luis de Guindos, Piero Cipollone, Isabel Schnabel , and Joachim Nagel.
Data released by Destatis on Friday revealed that Germany’s industrial sector activity fell sharply in March, with Industrial Production falling by 0.7% MoM, versus a decline of 0.5% prior (revised from -0.3%). This figure came in weaker than the expectation of a 0.5% rise.
Annually, German Industrial Production arrived at -2.8% in March, following February’s revised 0.2% decrease. The Euro edges slightly lower against the GBP in an immediate reaction to the worse-than-expected German report.
Hawkish remarks from the ECB officials might help limit the EUR’s losses. ECB Executive Board member Isabel Schnabel bolstered expectations that the bank could raise interest rates as soon as next month, saying companies and households were now reacting in a concerning way to surging global energy prices.
Meanwhile, ECB board member Piero Cipollone noted on Wednesday that the chance of a central bank rate hike has risen as inflation pressures are high, even as negotiated wage data showed pay demands had yet to increase.
On the UK’s front, the Bank of England (BoE) decided to hold the bank rate steady at 3.75% as widely expected at the last meeting, presenting a scenario framework that suggests rate hikes could be appropriate but avoiding any pre-commitment. BoE Governor Andrew Bailey warned of “forceful tightening” if energy price shocks from the Middle East conflict continue to drive inflation.
