GBP/EUR Exchange Rate Climbs on Upbeat Retail Sales Figures
The Pound Sterling to Euro (GBP/EUR) exchange rate is trending higher this morning as GBP investors welcome the release of the UK’s latest retail sales figures.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1104, up around 0.3% so far this morning.
Pound (GBP) Lifted by Strong Retail Sales Figures
The Pound (GBP) accelerated against the Euro (EUR) this morning, with the GBP/EUR exchange rate rallying from its recent lows on the back of some stronger-than-expected UK retail sales figures.
According to data published by the Office for National Statistics (ONS), UK retail sales rocketed up from -0.6% to 1% in June, roaring past expectations that sales growth would languish at -0.3%.
The rebound was supported by growth in all retail sectors apart from food stores, with non-food sales offering the strongest contribution.
GBP investors cheered the surge in retail sales last month on hopes that it could help the UK economy avoid a contraction in the second quarter.
Helpful news for #economy as #UK #retail sales volumes stronger-than expected in June as rose 1.0% month-on-month. Followed dips in May& April. Rose 0.7% quarter-on-quarter in second quarter increasing chances that the economy avoided contraction in Q2.
— Howard Archer (@HowardArcherUK) July 18, 2019
However, limiting the upside in the Pound today was a report from the Office for Budget Responsibility in which it warned a no-deal Brexit could cause a recession in the UK.
Euro (EUR) Muted on Dovish ECB Expectations
At the same time, expectations that the European Central Bank (ECB) will introduce fresh stimulus into the Eurozone this year continues to limit the appeal of the Euro (EUR).
Dovish chatter from the ECB in recent weeks have signalled that the Bank is prepared to ease its monetary policy in the near term to help prop up growth and stimulate inflation in the bloc.
The ECB is expected to introduce the stimulus by resuming its quantitative easing programme or begin cutting rates in the coming months, with analysts expecting next week’s policy meeting to offer some clear forward guidance providing a rough timeline for when this may take place.
GBP/EUR Exchange Rate Forecast: Brexit Jitters to Keep the Pressure on Sterling
Looking ahead, the Pound Euro (GBP/EUR) exchange rate faces the prospect of further losses in the coming weeks as persistent Brexit uncertainty keeps the pressure on Sterling.
The Pound has been hit by heavy selling over the past few weeks as spurred on by rising expectations that the UK is hurtling towards a no-deal Brexit.
With Boris Johnson widely expected to enter Downing Street next week, these fears are likely to become even more pronounced, leading investors to further limit their positions in GBP as we approach the deadline in October.
In the meantime, in the run up to next week’s ECB meeting, the focus for EUR investors will be on the Eurozone’s latest PMI figures.
This may drive the Euro lower as economist forecast that growth in the Eurozone’s private sector will have begun to have slowed again in July.