Pound Euro (GBP/EUR) Exchange Rate Firms Modest Gains Thanks to Strong UK Retail Report

Pound Euro Exchange Rate Remains Appealing at the End of Calmer Week

In one of the calmer weeks for the Pound Sterling to Euro (GBP/EUR) exchange rate lately, the Pound’s resilience has left the pair higher. Hopes for a Brexit deal soon, combined with solid UK data, are supporting the Pound.

GBP/EUR has been trending with a generally steady upside bias since opening this week at the interbank level of 1.11. GBP/EUR has touched on highs of 1.12 this week, but remains in the region of 1.11 at the time of writing.

Still, while this week’s gains have been modest, GBP/EUR has edged closer to last week’s highs. Last week’s high of 1.12 was the best level for the pair in half a year, so GBP/EUR is quite strong overall.

The Pound could see even stronger gains next week as well, depending on how UK-EU Brexit negotiations unfold.

Pound (GBP) Exchange Rates Find Support in Impressive Retail Sales Report

For most of the week, the Pound has been edging higher amid expectations that the UK and EU were getting closer to reaching a Brexit deal.

Today though, the Pound saw another boost in demand. The Pound sustained gains more easily thanks to today’s stronger than expected UK retail sales results.

UK retail sales were expected to rebound to 4.2% in October, but instead jumped to 5.8% year-on-year. The monthly figure was a solid 1.2%, well up on the expected stagnant 0.0%.

According to Jonathan Athow, Deputy National Statistician for Economic Statistics at the Office for National Statistics (ONS):

‘Despite the introduction of some local lockdowns in October, retail sales continued its recent run of strong growth.

Feedback from shops suggested some consumers may have brought forward their Christmas shopping, ahead of potential further restrictions. Online stores also saw strong sales, boosted by widespread offers.’

Euro (EUR) Exchange Rates Find No Impetus in ECB Comments

The Euro outlook has been largely unchanged this week. The Eurozone’s coronavirus situation continues to gradually worsen with major economies seeing fresh restrictions, and data has been unsurprising.

As a result, the Euro’s movement has been driven largely by strength in rival currencies. Mixed movement in the Euro’s rival the US Dollar (USD) is limiting the Euro’s appeal.

Fresh comments from European Central Bank (ECB) President Christine Lagarde did little for the Euro. A speech held today made no real reference to monetary policy, but she continued to express concern about the impact of the coronavirus pandemic:

‘The coronavirus (COVID-19) pandemic has rightly focused minds on the here and now – on saving lives and securing livelihoods.

Our immediate priority has been to protect the economy until widespread immunity is achieved’

Pound to Euro (GBP/EUR) Exchange Rate Awaits Brexit Developments

Data has had little impact on the direction of Pound to Euro exchange rate trade in recent sessions. Brexit remains the core focus for Pound investors, so it remains the primary cause of movement for GBP/EUR.

Markets expect a Brexit deal to be reached soon. Bets have been rising that a deal could be announced early next week.

If a Brexit deal is indeed announced, the Pound outlook is likely to improve. Much of the downside risk affecting Sterling would soften, though coronavirus anxiety would persist.

On the other hand, if talks go poorly then no-deal Brexit fears could return and the Pound could shed much of its recent gains.

Key data could also influence the Pound Euro exchange rate next week. November PMI projections from Markit will give investors a better idea of how the UK and Eurozone economies are handling the coronavirus pandemic this month.

Josh Jeffery

Contact Josh Jeffery


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