Pound Euro (GBP/EUR) Exchange Rate Levels as Eurozone Retail Sales Disappoint, USD Strengthens

GBP/EUR Exchange Rate Trades Sideways as Both Currencies Face Headwinds

(Updated 17:00, 06/10/2021) The Euro (EUR) relinquished its gains against the Pound this afternoon, as poor Eurozone retail sales weighed upon the single currency and US Dollar (USD) headwinds subdued EUR sentiment amidst a risk-off market mood.

Despite increasing on last month’s 2.6% contraction, retail data across the bloc revealed limited growth of 0.3% as opposed to to 0.8% expected.

Online trading and non-food product sales increased, while purchases of food, drinks and tobacco fell for a fifth straight month. Fuel sales were also down 0.1% in August from 0.6% in July.

Widespread risk aversion and strength in the US Dollar also weighed upon the Euro- as a result of the strong negative correlation between EUR and USD, ‘Greenback’ upside exerts downside pressure upon the single currency.

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Pound Euro Exchange Rate Sinks on UK Fuel Insecurity, German Factory Orders Slide

The Pound Euro (GBP/EUR) exchange rate has dipped slightly this morning as UK petrol prices increase and two thirds of UK firms expect to raise prices in the run up to Christmas.

At the time of writing, GBP/EUR is trading at €1.1742, up fractionally on today’s opening levels.

Pound (GBP) Sinks on Fuel Prices, UK Inflation Fears

The Pound (GBP) has fallen against the majority of its peers this morning as GBP investors are spooked by forecasts of a spike in petrol prices, alongside increasing costs of consumer goods.

Motoring group the RAC have warned that petrol costs are closing in on an all-time high, nearing the record set in April 2012 of 142.48 pence per litre.

The RAC’s fuel spokesperson, Simon Williams, said that oil demand was outpacing supply as economies pick up pace amid eased Covid restrictions: the increase is exacerbated by Opec opting not to increase oil flows significantly this week.

Williams remarked:

‘[The trend] looks likely to spell further misery for drivers at the pumps as we head towards Christmas… As forecourts’ fuel stocks return to normal drivers will inevitably switch from worrying about whether they can get the petrol or diesel they need, to just how much a fill-up is costing them.’

Adding to Pound downside, two in three UK firms are expecting to raise prices of consumer goods in the run up to Christmas.

The British Chambers of Commerce said inflation expectations had risen to their highest since its records began at the end of the 1980s, with 62% of industrial firms planning price hikes over the next three months.

Mounting cost pressures are a major concern for retailers, alongside a shortage of drivers and other staff, a scarcity of ingredients and increasing labour costs.

Euro (EUR) Faces Headwinds as German Factory Orders Plummet

The Euro (EUR) is trading in a mixed range today as German factory orders slumped by -7.7% for the month of August.

Supply bottlenecks and shortages hit factories in Europe’s largest economy, with car orders significantly reduced as well as orders for metal production and processing.

While the data presents headwinds, Oliver Raku of Oxford Economics is optimistic that the obstacles to growth are temporary, observing that ‘the sudden massive drop in factory orders is more due to supply bottlenecks & other temp issues, than a sign of the industrial cycle ending.’

Raku also notes that the consensus on Q3 GDP appears fairly optimistic.

Exerting additional pressure upon the Euro, Europe’s energy crunch is deepening as gas prices surge once more.

Bloomberg’s Javier Blas reports that natural gas contracts opened sharply higher today as temperatures begin to drop across Europe: benchmark UK NBP and Dutch TTF are up 12-15% after gaining around 20% on Tuesday, both setting record high rates.

The Chief Energy Correspondent also warns that the energy crisis could morph into credit events, affecting the corporate world and political relationships.

Pound Euro Exchange Rate Forecast: Retail Sales to Boost EUR?

Looking ahead, Eurozone retail sales this morning could help the Euro to stage a recovery, if the data improves upon last month as expected. Sales last month fell by 2.3% but are expected to reverse some of those losses today.

Meanwhile, The UK’s construction PMI for September has printed below expectations, potentially exerting Pound headwinds. If concerns over the UK fuel crisis escalate, Sterling could come under significant pressure later today.