This appears to yet further evidence of the Eurozone’s continuing economic slowdown in the second quarter, following on from the bloc’s weak performance at the start of the year.
Germany’s figures were particularly worrying for EUR investors, as production contracted at a much faster pace than expected, with growth plummeting from 1.7 percent to -1 percent.
Today’s data is just the latest in a run of gloomy figures from the Eurozone’s two largest economies, which has left investors fearing the bloc’s recent slowdown will prove to be more than just a blip.
At the same time the pound remains buoyed this morning by recent comments from Bank of England Deputy Dave Ramsden.
Speaking in London yesterday, Mr Ramsden said he agreed with the bank’s assessment that the UK’s slowdown in the first quarter is likely to be temporary.
He said on Thursday: “It is still early days. We are still only two thirds of the way through the second quarter… Even so, the data we have had so far suggests our interpretation of the slowdown in the first quarter as temporary looks to be being borne out.”
Mr Ramsden is seen as one of the more dovish members of the BoE, so his comments came as a welcome surprise for GBP investors, with many interpreting this as evidence of a hawkish shift within the bank, something which bodes well for a possible rate hike later in the year.
Looking ahead to next week’s session, the focus for investors is likely to be on the European Central Bank’s (ECB) latest policy meeting.
This could prompt some significant movement in the GBP/EUR exchange rate on Thursday as markets hope to learn more about how the ECB plans to wind down its quantitative easing programme.
In terms of UK data, traders will be waiting for the release of Britain’s latest inflation and wage growth figures, with an uptick in either likely to be well received by GBP investors as it bolsters the chances of a BoE rate hike later in the year.