EUR GBP Lower with Mixed European Data

The EUR GBP exchange rate was lower on Monday by 0.36% after mixed data from the eurozone. Construction rose at its fastest pace in four years in Europe, but the single currency was pulled lower by a drop in German factory orders. UK construction numbers were also better than expected.

The EUR v GBP trades at 0.8503 as it tries to hold onto the round number with German ZEW data released today.

European data a mixed bag as construction beats German factories

The eurozone construction sector grew at its fastest pace in nearly four years in November, despite concerns over the virus.

There was a continued rise in home building, alongside a second successive rise in commercial construction, but civil engineering was lower.

HIS Markit noted rising costs, saying: “Notably, input costs continued to increase at a substantial pace amid ongoing severe supply chain disruption. These lingering issues weighed on business sentiment, with the degree of optimism regarding the year-ahead outlook easing to the softest since April.”

ING said the order book collapse ‘does not bode well for the medium-term outlook for industry’.

“The sharp collapse over the summer is increasingly leaving its mark on industry – a reflection perhaps of ongoing supply chain frictions and companies simply delaying new orders or, worse, cancelling orders, knowing that delivery times are long anyway.”

Today will see further data for Germany with IFO business climate sentiment, however that could underperform with the recent restrictions on Europe.

UK construction recovers but BDO warns of shortages

Britain’s construction industry grew at its strongest pace in four months in November, as delays obtaining eased.

IHS Markit said there was a sharp increase in business activity at building firms last month, which was spurred by commercial work.

In a boost for the industry, the number of firms reporting longer delivery times fell to 47% in November, from a peak of 77% in June.

Elsewhere, accountancy firm BDO said that 80% of medium-sized business leaders expect their end of year trading to be impacted by higher fuel prices, supply chain disruptions or energy costs.

Ed Dwan, partner at BDO, said the new virus variant was also a threat.

“Following a year of disruption, many businesses will have been hoping for a strong finish to 2021 and a fresh start for 2022.

The harsh reality is that continued supply chain issues, rising energy prices and increasing costs means that many are taking further drastic measures to stay afloat. These issues could also be further exacerbated by the new COVID-19 variant.”

The UK is seeing rising case numbers, but the initial reports have seen mild symptoms and markets were buoyant on Monday. Professor Paul Hunter said it might be after Christmas until scientists have more data and markets are taking the milder symptoms as a green light to push stocks higher.

Professor Calum Semple of SAGE said last week: “This is not a disaster, and the headlines from some of my colleagues saying ‘this is horrendous’ I think are hugely overstating the situation.”

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