Pound Euro (GBP/EUR) Exchange Rate Flat as British Public Borrowing Soars to Record High

Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as UK Retail Sales Rebounded

The Pound Sterling Euro (GBP/EUR) exchange rate was left flat on Friday morning. This left the pairing trading at around €1.1090.

The Pound remained under pressure despite data showing Britain’s retail sales rebounded more than expected in May.

Sales jumped last month as the UK began to gradually relax its coronavirus lockdown restrictions.

Official data showed sales volumes rose by a record 12%. This followed April’s historic decline of -18%.

However, further data revealed public borrowing in the country soared to a record high, and debt passed 100% of economic output.

Public sector net borrowing hit £55.2 billion in May, a record after April’s reading was downwardly revised to £48.5 billion.

This was the first time a measure of public sector debt rose above 100% of economic output since 1963.

Meanwhile, Bank of England (BoE) Governor Andrew Bailey said the economy appeared to be on track to contract less than expected in the first half of 2020 than he expected last month.

Although, this does not necessarily mean there will be a strong rebound. This left GBP unable to make significant gains today.

Euro (EUR) Flat as Attention Turns to EU Summit

The single currency remained under pressure today as market attention turned to the European Union summit.

The summit began this morning and EU leaders are trying to navigate regional divisions in order to deliver a €750 billion recovery fund.

A press conference is expected to follow the summit, which could weigh on EUR if the bloc has been unable to reach an agreement.

The Euro has lost around 1.3% of its value against its biggest rival, the US Dollar (USD) so far this week. Questions about whether the plan can be realised have weighed on the single currency.

The Recovery Plan includes around €500 billion in grants, particularly aimed at countries most affected by the coronavirus pandemic.

According to FX strategist at OCBC Bank in Singapore, Terence Wu:

‘Any sense of disappointment on the virus recovery plan should see the pair breach 1.1200 convincingly, and open the path towards 1.1050. All bearish bets will be off if cohesion is shown over the virus recovery front.’

Pound Euro Outlook: Eurozone Consumer Confidence in Focus

Looking ahead to the start of next week, the Euro (EUR) could edge higher against the Pound (GBP) following the release of consumer confidence data.

If the Eurozone’s flash consumer confidence rises higher than expected in June, the single currency will be offered support.

However, Sterling could claw back some of these losses by Tuesday morning following the release of flash PMI data.

If Britain’s manufacturing PMI jumps, moving closer to the no-change 50 mark in June, it will offer GBP some support. This could leave the Pound Euro (GBP/EUR) exchange rate flat.

Millie Empson

Contact Millie Empson