GBP Slips As German Factory Orders Surge

The Pound to Euro (GBP/EUR) exchange rate edged lower on Thursday as upbeat German factory data provided fresh support for the single currency.

DAILY RECAP:

The Euro (EUR) traded with modest gains on Thursday following the release of stronger-than-expected German industrial data.

Figures from statistics agency Destatis showed German factory orders surged by 5.6% in November, rebounding sharply from October’s 1.6% increase and smashing forecasts for a 1% contraction.

The jump in orders was largely attributed to a surge in defence-related demand, as European governments accelerate rearmament efforts amid heightened geopolitical tensions.

The data was welcomed by EUR investors as a sign that the Eurozone’s largest economy may finally be emerging from the prolonged industrial downturn that has weighed on growth for more than a year.

However, the Euro’s upside was tempered by lingering concerns over European security, including the ongoing war in Ukraine and renewed uncertainty surrounding US territorial ambitions over Greenland.

Adding to the caution, the Eurozone’s latest economic sentiment index fell more than expected to a three-month low in December, signalling that confidence across the bloc remains fragile.

Meanwhile, the Pound (GBP) struggled to attract support amid a continued lull in impactful UK economic data.

Sterling was also weighed down by mixed reports from UK retailers following the Christmas trading period. While footfall reportedly improved, many firms noted that weak consumer confidence prevented higher traffic from translating into stronger profits.

These developments have left GBP investors questioning the resilience of UK economic growth in the final quarter of 2025 and how this may shape Bank of England policy decisions early in 2026.

Near-Term GBP/EUR Forecast: German Data to Keep the Euro Supported?

Looking ahead to the end of the week, the Pound Euro exchange rate could remain under pressure with the release of Germany’s latest industrial production and trade figures.

If industrial output mirrors the sharp rebound seen in factory orders, it could further ease concerns over Germany’s manufacturing sector and underpin the Euro.

However, any upside may be capped if trade data shows that German export growth stalled over the same period.

Meanwhile, UK economic data remains scarce, leaving the Pound largely at the mercy of wider market sentiment. Sterling could find some support if weak US payrolls data undermines the US Dollar and boosts broader risk appetite.