The Pound to Euro (GBP/EUR) exchange rate fell in Thursday’s European session as Brexit fears created problems for the car industry. Car manufacturers suffered a blow in September with output shrinking by -4.1%. Domestic demand also dropped sharply by 14.2%, and there was also a 1.1% decline in production destined for exportation. On the year, September 2017 saw 6,500 fewer cars made than September 2016.
The Society of Motor Manufacturers and Traders (SMMT) Chief Executive Mike Hawes said: With UK car manufacturing falling for a fifth month this year, it’s clear that declining consumer and business confidence is affecting domestic demand and hence production volumes. Brexit is the greatest challenge of our times and yet we still don’t have any clarity on what our future relationship with our biggest trading partner will look like, nor detail of the transitional deal being sought.’
However, not everyone’s convinced the automotive slowing is Brexit-related:
— Simon French (@shjfrench) October 26, 2017
Additionally, car giant Toyota has warned the UK government to ‘lift the fog’ shrouding Brexit negotiations as the uncertainty over Britain’s trading relationship with the European Union is hindering its plans for the future of its UK business.
However, this isn’t the only piece of bad news the car industry has had in recent months. Car sales have dropped for six consecutive months with a 9% fall in September. Vauxhall decided to axe 400 jobs at its Ellesmere Port facility as Astra demand declined. Meanwhile, leading car dealership group Pendragon experienced a sharp drop in share prices after announcing a profit warning on the back of a drop in demand and softer prices.
— Nicolai von Ondarza (@NvOndarza) October 17, 2016
Euro (EUR) Awaits European Central Bank (ECB) Policy Meeting and QE Announcement
Meanwhile, the Euro could come under pressure this week as European Central Bank (ECB) policymakers convene to set monetary policy today. It’s expected that the central bank could decide to cut the pace of its massive quantitative easing programme, which at present creates €60bn of new money every month. However, inflation in the currency bloc still remains below target, and the Euro’s recent strength may also play a part in how much the central bank eases.
South African Rand (ZAR) Exchange Rate Falls on Budget Surprise
In other news, the South African Rand tumbled to a 10-month low on Wednesday following Finance Minister Malusi Gigaba announcing growth forecasts had weakened amid rising government debt. The budget speech caused a sell-off as Gigaba announced that the budget deficit was expected to reach 4.3% of Gross Domestic Product (GDP) growth in the 2017/2018 fiscal year – the highest level seen since 2009, and significantly different to the government target of 3.1%.
Interbank Exchange Rates
The Euro to Pound (EUR/GBP) exchange rate is trading at interbank levels of 0.8929.
The Pound to South African Rand (GBP/ZAR) exchange rate rests at 18.7085.
The Pound to Euro (GBP/EUR) exchange rate is trending in the interbank region of 1.1196.