Pound Euro (GBP/EUR) Exchange Rate Dives amid Dour UK Retail Data
The Pound Euro (GBP/EUR) exchange rate is falling this morning, following the release of September’s UK retail sales figures.
At the time of writing, GBP/EUR is trading at roughly €1.1414, a drop of around 0.5% from the morning’s opening rates.
Pound (GBP) Crumbles as UK Retail Data Drops for Second Consecutive Month
The Pound (GBP) is seeing strong headwinds this morning, and is dropping against most of its peers. This comes with the release of September’s retail sales data, which marked a second consecutive decline.
Retail sales data for September came in below market forecasts. Analysts were anticipating a decline of only 0.5%, rather than the 1.4% printed today. This comes after August showed a revised decline of 1.7%, marking the second consecutive month of decline in retail sales. This is weighing upon GBP sentiment this morning as it stokes concerns over the UK’s economic outlook.
Adding to the weight on Sterling was the release of September’s public sector borrowing figures. The expenditure of £79.3 billion far exceeded the Office for Budget Responsibility’s (OBR) estimate of £73.6 billion.
Ruth Gregory, the senior UK economist at Capital Economics, explained this further:
‘The weakness in retail sales and overshoot of the Office for Budget Responsibility’s March public borrowing forecast won’t make the next prime minister’s task any easier in navigating the economy through the cost of living crisis, cost of borrowing crisis and the cost of credibility crisis.’
Furthermore, political uncertainty continues to weigh on the Pound, following on from yesterday’s sudden resignation of Prime Minister Liz Truss.
Euro (EUR) Mixed as Ukraine-Russia Conflict Deepens
The Euro (EUR) is seeing mixed to positive trade this morning, following on from further developments in the Ukraine-Russia Conflict.
This morning saw reports of explosions in Zaporizhzhia, which have been attributed to Russian missile strikes. With Zaporizhzhia housing a key nuclear plant, the attacks on this region may contribute further strain to EU energy supplies.
Ukraine’s governor of Zaporizhzia, Oleksandr Starukh, stated:
‘As a result of the attack, the gas system was damaged in a residential high-rise building, there was a fire, and a wall was destroyed. Specialised services are already working.’
However, the effects of these strikes on the wider bloc have been muted somewhat following on from Thursday’s European Council meeting. During the meeting, leaders discussed measures to alleviate the Eurozone’s energy crisis. This optimism has allowed the currency to enjoy some support during today’s session.
Pound Euro (GBP/EUR) Exchange Rate Forecast: How Will UK Political Instability Affect Sterling?
Looking ahead, the GBP/EUR exchange rate will mostly be beholden to the UK’s political landscape.
With data scarce for the Pound, all eyes will be on the Conservative leadership race. Volatility may occur during the upcoming week, dependent on who comes forward and ultimately wins.
For the Euro, this afternoon will bring a consumer confidence flash for October. With pessimism expected, EUR may weaken.
Furthermore, the Euro may be capped by any further developments in the Ukraine-Russia conflict. With no end in sight, the single currency may continue to endure muted trade in the future.