GBP/EUR Exchange Rate Slumps to 218 Low as August Rate Hike in Doubt
UPDATED: The Pound Sterling to Euro (GBP/EUR) exchange rate remains close to an eight-month low this afternoon in the wake of some abysmal retail sales figures from the UK.
A shock contraction in sales growth last month has left Sterling reeling today as economists slash expectations that the Bank of England (BoE) will raise interest rates next month.
Further weakening the GBP exchange rate is the increased uncertainty surrounding Brexit as reports say the EU is telling its members to begin preparing for a no-deal Brexit.
UK Consumers Choose Sunbathing over Shopping causing Pound Euro (GBP/EUR) Exchange Rate to Flounder
The Pound Sterling to Euro (GBP/EUR) exchange rate is floundering this morning following the release of some softer-than-expected retail sales figures from the UK.
At the time of writing GBP/EUR is currently down around 0.3% from this morning’s opening levels, leaving the pairing at its lowest levels since December 2017.
The Pound (GBP) came under further selling pressure this morning following a shock contraction in UK retail sales last month.
According to the Office for National Statistics (ONS) UK sales growth slumped from 1.4% to -0.5% last month.
Pound Sterling (GBP) Exchange Rate Hit by UK Retail Sales Slump
This was even worse than the slide to 0.2% that had been forecast, and was also the first contraction in growth since the disruption caused by the ‘Beast from the East’ in March.
While some analysts had been optimistic about the chances of sales exceeding expectations due to the sunny weather and start of the World Cup, these factors proved to have negative contributions as non-food sales were hit as consumers looked to enjoy the sun rather than go shopping.
The ONS reported:
‘While hot weather and World Cup celebrations increased food store sales, it was suggested by retailers that these factors resulted in a decrease in footfall in non-food stores; which, along with non-store retailing, resulted in a monthly decline of 0.5% in the quantity bought.’
The poor retail sales figures are the latest in a string of lacklustre UK data releases this week, which has led economists to reconsider their previous expectations that the Bank of England (BoE) is on track for a rate hike next month, with many analysts now suggesting it could go either way.
Euro (EUR) Exchange Rate Advances as USD Slips
Meanwhile the Euro (EUR) appears to be ticking higher not only against the Pound (GBP) but most of its other peers this morning, with the single currency benefiting as investors seek to book their profits from the US Dollar (USD) following its jump this week.
However it remains unclear if the Euro will be able to cling to these gains, with the USD exchange rate beginning to push higher once again, potentially pressuring EUR later in the session.
GBP/EUR Exchange Rate Outlook: Brexit to Drag on Sterling Sentiment Once Again
With the UK’s new Brexit secretary, Dominic Raab, holding his first talks with EU Chief Negotiator Michel Barnier later today, movement in the GBP/EUR exchange rate looks to become dictated by Brexit sentiment once again.
This will also be the first round of talks since the release of the UK government’s Brexit white paper and GBP investors will be eager to gauge the official reaction from the EU.
However, with growing political turmoil in the UK and Theresa May having already been forced to make alterations to her initial proposals due to pressure from Brexiteers, the outlook isn’t looking great, with a negative reaction from Brussel likely to weaken the Pound (GBP) exchange rate.
Meanwhile the Euro may be forced to relinquish some ground on Friday as Germany publishes its latest Producer Price Index (PPI).
Economists forecast tomorrow’s data will see price growth begin to slow in June, potentially dragging on the EUR exchange rate.