(Updated 16:50 20/05/22)
The Pound Euro (GBP/EUR) exchange rate continued to climb today. Expectations of a rate hike from the Bank of England (BoE) kept the Pound (GBP) bolstered. This hawkishness came after Huw Pill’s comments earlier in the day. A risk-on market mood likely boosted the pair further.
At time of writing the GBP/EUR exchange rate is at around €1.1825, which is up roughly 0.4% from this morning’s opening figures.
Pound Euro (GBP/EUR) Exchange Rate Ticks Upward despite Brexit Jitters
The Pound Euro (GBP/EUR) exchange rate is edging higher today. An unexpected boost to UK retail sales is likely pushing the currency pair higher today. Major gains for GBP/EUR may be limited however by sustained bets on a rate hike from the European Central Bank (ECB). Fresh Brexit tensions may also be weighing on the pair today.
At time of writing the GBP/EUR exchange rate is at around €1.1804, which is up around 0.2% from this morning’s opening figures.
Pound (GBP) Limits Losses after Above-Forecast Retail Sales
The Pound (GBP) is struggling against many of its rivals today. Upbeat retail sales data is likely underpinning Sterling. The country’s poor economic outlook meanwhile may be keeping the currency suppressed.
Retail sales rose by 1.2% in April versus a forecast fall of -0.2%. The sector’s recovery was thought to be driven by increased supermarket spending and rising sales of alcohol and tobacco. An increase to fuel sales after prices stabilised last month also helped boost figures.
The overall picture remains downbeat however. Year-on-year sales volumes have continued to drop as inflation and the cost-of-living crisis continues to hit household purchasing power.
Nicholas Farr, assistant economist at Capital Economics, said:
‘The unexpectedly strong 1.4% m/m rise in retail sales in April suggests that the cost of living crisis hasn’t caused consumer spending to collapse and means that the economy may have a little more momentum than we thought. It also supports our view that a weaker economy won’t solve the issue of sky-high inflation for the Bank of England (BoE) without interest rates having to rise much further.’
BoE policymaker Huw Pill seemed to reinforce this view as he signalled that the central bank would need to raise rates further. The hawkish comments may be helping Sterling to avoid major losses today.
On the other hand, fresh Brexit-related tensions could be pulling the Pound lower today. Tensions between the UK and EU over the Northern Ireland Protocol have continued to ramp up in recent days.
Euro (EUR) Slips despite Hawkish ECB Minutes
The Euro (EUR) is falling against many of its competitors today despite . The single currency is potentially seeing its losses limited by a hawkish forward stance from the European Central Bank (ECB), however. Additionally, a weakened US Dollar (USD) is helping drive traders toward EUR.
The release of the minutes from the ECB’s April meeting only added to speculation of an imminent interest rate hike.
The hawkish minutes illustrated the central bank’s concerns over continually soaring inflation, and analysts felt they all but confirmed a July rate hike.
Bets on EUR are likely limited ahead of consumer confidence figures later today. If the figures fall as forecast then it could see the single currency slide even further.
GBP/EUR Exchange Rate Forecast: Will UK-EU Talks Show Progress?
Looking to the coming week for the Pound (GBP), a downturn to private sector growth could suppress the currency’s growth if PMI figures print as forecast on Tuesday. Further developments in talks between the UK and EU could also prompt movement in Sterling.
For the Euro (EUR), private sector output across both Germany and the Eurozone as a whole is forecast to fall on Tuesday. This could drag the single currency down.
On the other hand, a predicted rise in German GDP figures could bolster confidence in EUR on Wednesday.