UK Retail Sales Slump Fails to Dent Pound Sterling Euro (GBP/EUR) Exchange Rate
UPDATE: An unexpectedly sharp decline in the latest CBI reported retail sales index failed to prevent the Pound Sterling Euro (GBP/EUR) exchange rate from recovering some ground this morning.
Even so, investors were caught off guard as the sales index slumped from -27 to -42, defying forecasts of a modest improvement in activity.
While this does not appear to bode well for the second quarter economic outlook, with weaker consumer spending likely to weigh on growth, Pound Sterling (GBP) still made some modest gains at the start of the day.
Mounting Pressure on Boris Johnson Weighs on GBP/EUR Exchange Rate
UPDATE: Increasing unrest within the Conservative Party over leadership candidate Boris Johnson’s lack of public explanation for a reported altercation at his residence over the weekend weighed on Pound Sterling (GBP) this afternoon.
While Johnson emerged as the early frontrunner to succeed Theresa May as Conservative leader increasing questions over his conduct have fostered a greater sense of uncertainty over the final result.
This latest political unrest kept the Pound Sterling to Euro (GBP/EUR) exchange rate trending lower over the course of the day.
Mixed German Business Confidence Fails to Benefit Pound Sterling Euro (GBP/EUR) Exchange Rate
A mixed set of IFO business confidence indexes left the Pound Sterling to Euro (GBP/EUR) exchange rate on the back foot this morning.
Although the expectations index saw a sharper-than-expected fall on the month in June, dropping from 95.2 to 94.2, this was not enough to weigh down the Euro (EUR) at the start of the week.
Investors instead focused on the improvement in the current assessment index, which suggests that the Eurozone’s powerhouse economy is in a better state of health than previously assumed.
While none of this is likely to alter the European Central Bank’s (ECB) current dovish policy outlook EUR exchange rates still made gains on the back of the data.
Political Uncertainty Keeps Pound Sterling (GBP) on Back Foot
Confidence in Pound Sterling (GBP), meanwhile, remained limited thanks to ongoing political jitters and Brexit-based uncertainty.
Markets continued to speculate over the outcome of the Conservative leadership contest as the rhetoric of the two candidates escalated.
With some Conservative MPs reportedly planning to revolt in response to Boris Johnson’s current stance on Brexit the prospect of an extended period of uncertainty weighed heavily on GBP exchange rates today.
In the wake of last week’s disappointing public sector net borrowing data there appeared little reason to favour the Pound over its rivals at this stage.
Improved CBI Reported Sales to Offer GBP/EUR Exchange Rate Boost
The mood towards the Pound could improve tomorrow, however, as forecasts point towards an uptick in June’s CBI reported sales index.
With the index expected to pick up from -27 to just -3 on the month the GBP/EUR exchange rate looks set to recover some of its lost ground.
Evidence that the UK economy has started to shrug off its anxiety over the lack of clarity on the issue of Brexit could see GBP exchange rates trending higher across the board.
On the other hand, if the index fails to improve as far as forecast this could exacerbate existing worries over the underlying health of the domestic economy.
As long as growth appears at risk of slowing in the second quarter the appeal of Pound Sterling may prove limited.
Euro (EUR) Pressure Forecast on German Consumer Price Index Data
Thursday’s German consumer price index data could provoke fresh volatility for the single currency, however.
If inflationary pressure shows fresh signs of easing in June this is likely to drag EUR exchange rates into a renewed slump.
Unless inflation picks up on both the month and the year investors may lack the incentive to pile into the Euro, given the high odds of imminent ECB monetary loosening.
However, an increase in the consumer price index may offer EUR exchange rates a solid boost in the short term.
Although anything short of a significant increase in inflationary pressure is unlikely to alter the current policy outlook of the ECB this could still weigh on the GBP/EUR exchange rate on Thursday.