GBP/EUR Exchange Rate Muted on Poor Retail Sales Figures
The Pound to Euro (GBP/EUR) exchange rate is trading sideways this morning, after an initial rally in Sterling was curtailed by the publication of the latest UK retail sales figures.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1767, virtually unchanged from the day’s opening levels.
Pound (GBP) Undermined by Surprise Slump in Retail Sales
The Pound (GBP) is languishing at a two-week low against the Euro (EUR) this morning as markets react to the UK’s latest retail sales figures.
According to data published by the Office for National Statistics (ONS), after stalling in October, sales growth contracted 0.6% last month, missing expectations for a modest 0.3% expansion.
The slump comes as a major disappointment to GBP investors as it fuels fears that the UK economy could stagnate or even shrink in the fourth quarter.
It’s worth noting however that November’s figures excluded Black Friday, which could lead to a bumper reading in December.
The ONS writes:
‘In 2019, the official Black Friday was on 29 November; this is six days after the end of our November reporting period, which covers four weeks from 27 October to 23 November.
‘The official Black Friday date will fall into our December release with only early promotions captured in our November estimates.’
Euro (ECB) Buoyed by US Dollar (USD) Weakness
At the same time, the Euro (EUR) has found some modest support this morning, in light of some US Dollar (USD) selling.
As the most traded currency pairing with the US Dollar, the Euro offer benefits when demand for the ‘Greenback’ weakens.
The US Dollar is on the defensive this morning after the US House of Representatives voted overnight to impeach US President Donald Trump for abuse of power and obstruction of Congress.
While the Republican Party’s control of the Senate makes it highly unlikely Trump will be removed from office, the impeachment vote was enough to unnerve some USD investors.
GBP/EUR Exchange Rate Forecast: Dovish BoE Outlook to Drag on Sterling?
Still to come today we have the Bank of England’s (BoE) final rate decision of 2019, which is sure to stir some movement in the Pound to Euro (GBP/EUR) exchange rate later this afternoon.
Economists are not expecting any policy changes from the BoE this month, although there is a strong chance of a split vote after two members of the Monetary Policy Committee (MPC) broke ranks last month to vote for an immediate rate cut.
Robert Wood, Chief UK Economist at Bank of America forecasts:
‘We expect the BoE vote to stay at 7-2 for no change as they wait to see incoming data. But the weak data flow suggests a risk of a third voter for a cut (perhaps Gertjan Vlieghe).’
Instead the focus for GBP investors will be on the BoE’s forward guidance for 2020, as they look for any hints that the bank could cut rates in the near term.
Meanwhile, the Euro could find some support at the end of this week’s session with the publication of the Eurozone’s consumer confidence figures.
Analysts forecast consumer sentiment will show a modest improvement this month, bolstering optimism as we head into 2020.