Pound Euro (GBP/EUR) Exchange Rate Climbs as UK Retail Sector Beats Forecasts

Pound Euro (GBP/EUR) Exchange Rate Rises Despite Criticism of UK Autumn Budget

(Updated 18/11/22 16:30)

The Pound Euro (GBP/EUR) exchange rate continued to climb over the course of the day. A return of global risk appetite helped to prop up the currency pair.

Geopolitical tensions also underpinned the pair.  Confirmation from Swedish prosecutors that the Nord Stream 1 and 2 pipeline explosions were sabotage added to tensions surrounding the Russia-Ukraine conflict.

Criticism of the UK’s Autumn budget statement capped gains for GBP/EUR today, however. The Institute for Fiscal Studies (IFS) briefing on the statement stated that the UK has got ‘a whole lot poorer’ after ‘a series of economic own goals’. The IFS went on to say that the UK will see its biggest ever fall to income growth over a two year period.

At time of writing the GBP/EUR exchange rate is at around €1.1507, which is up around 0.5% from this morning’s opening figures.

Original article continues below:

Pound Euro (GBP/EUR) Exchange Rate Boosted by UK Retail Performance

The Pound Euro (GBP/EUR) exchange rate is climbing today. The currency pair is likely being supported by above-forecast UK retail data. A return of global risk appetite may also be pushing GBP/EUR higher.

At time of writing the GBP/EUR exchange rate was at around €1.1496, which is up around 0.4% from this morning’s opening figures.

Pound (GBP) Bolstered by Above-Forecast Retail Sales Data

The Pound (GBP) is firming today after the UK’s retail sector registered above-forecast sales volumes in October. The country’s poor outlook following the Autumn budget statement on Thursday weighed on GBP, however.

Retail sales rose by 0.6% in October versus a forecast rise of 0.3%. The recovery comes after two consecutive months of downturn but was limited after closures in September for the funeral of Queen Elizabeth.

The long-term outlook for the sector was bleak, however. Experts are expecting discretionary household spending to fall even further as the UK enters a recession. The downbeat predictions may be keep gains for GBP limited today.

Market reaction to the UK’s Autumn budget statement may also be keeping Sterling suppressed today. The forecasts by the Office for Budget Responsibility (OBR) that came alongside the statement painted a bleak picture for the UK.

The OBR forecast a year-long recession for the UK and a 7% fall in living standards.

Euro (EUR) Ticks Lower amid Risk-On Mood

The Euro (EUR) is edging lower today amid a return of global risk appetite. A lack of significant data for the single currency is leaving it at the mercy of market forces.

A speech by European Central Bank (ECB) President Christine Lagarde may be having a mixed effect on EUR today.

On the one hand, Lagarde confirmed that the ECB would continue to raise interest rates. Lagarde stated that she expects to ‘raise rates further’ to prevent high inflation from becoming entrenched. Increased rate hike bets may be underpinning EUR today.

On the other, Lagarde also signalled that the ECB would act despite the risk of a recession for the Eurozone. The possibility of a severe economic downturn in the reading bloc may be pulling the Euro lower.

GBP/EUR Exchange Rate Forecast: Will UK Private Sector Downturn Worsen UK Outlook?

Looking to the coming week for the Pound, flash PMIs for the UK’s private sectors on Wednesday could weigh on the currency. November’s reading is expected to confirm a downturn across the country’s services and manufacturing sectors.

On Thursday, speeches from several Bank of England (BoE) officials could cause movement in the currency. If the speeches reinforce interest rate hike bets, then it could push GBP higher.

Also on Thursday, the CBI’s latest industrial trends orders data could cause further losses for the Pound. The figures are expected to slip in November.

For the Euro, German PPI figures on Monday could pull the single currency lower if it causes reduced ECB rate hike bets.

Eurozone and German PMI figures on Wednesday could also weigh on EUR if they print as forecast. Flash readings for November are expected to slide lower.

On Thursday and Friday, German data releases are likely to be the main drivers of movement in the Euro. Thursday’s forecast uptick in German business confidence could help to stem losses for EUR if figures print as forecast.

On the other hand, a further downturn in German consumer confidence could dent confidence in the single currency. The final reading of GDP growth figures could underpin EUR however if they confirm a third quarter expansion in the country’s economy.

Gareth Monk

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