Pound Euro Exchange Rate Sours as Poor Retail Sales Highlight Cost-of-Living Crisis
(Updated, 16:45, 21/4/23)
The Pound Euro (GBP/EUR) exchange rate is softening further as downbeat retail sales were compounded by mixed PMI data. Despite the service sector strengthening better-than-expected, and posting the highest score in a year, a slowing manufacturing sector concerned investors. However, Chris Williamson, Chief Business Economist at S&P Global, is optimistic over the UK economy going forward:
‘However, for now the key takeaway is that the economy as a whole is not only showing encouraging resilience but has gained growth momentum heading into the second quarter, the latest PMI reading broadly indicative of GDP rising at a robust quarterly rate of 0.4%.’
At time of writing the GBP/EUR exchange rate is trading around €1.1307, a 0.31% fall from this morning’s opening levels.
Original article continues below…
GBP/EUR Exchange Rate Fluctuates on Worse-than-Expected Retail Sales
The Pound Euro (GBP/EUR) exchange rate is rangebound after UK retail sales came in lower than expected as they fell 0.9% in March.
At time of writing the GBP/EUR exchange rate is trading around €1.1321, relatively unchanged from this morning’s opening levels.
Pound (GBP) Dampened by Poor Retail Sales
The Pound (GBP) is struggling for demand this morning in the wake of worse-than-expected retail sales in March. Against expectations of a 0.5% decline, sales fell even further, as they dropped 0.9% MoM.
The Office for National Statistics (ONS) reported that the wettest March in 40 years deterred shoppers as it kept them at home. Snapping a two-month streak of strong retail sales growth, the latest figure fell more than expected. Darren Morgan, Director of Economic Statistics at ONS, commented:
‘Retail fell sharply in March as poor weather impacted on sales across almost all sectors. In the latest month, department stores, clothing shops and garden centres experienced heavy declines as significant rainfall dampened enthusiasm for shopping.’
However, stemming any further losses for Sterling is consumer confidence reaching its highest level since February 2022. Posting its third consecutive monthly gain in April, the Gfk consumer confidence measure showed increased optimism in personal finances and the general economic situation. Joe Staton, Client Strategy Director at GfK, said:
‘The brighter views on what the general economy has in store for us, could even be seen as the proverbial green shoots of recovery.’
Euro (EUR) Supported by Quickening Economic Recovery
Meanwhile, the Euro (EUR) also struggled to find a clear direction in the wake of mixed services and manufacturing PMI data.
Stronger-than-expected service PMI boosted the economic recovery of the bloc. The sector comfortably beat market forecasts of 54.5 and printed at 56.6. The reading highlighted the strongest growth in the sector since April 2022. With new orders picking up pace for the third consecutive month, and job growth picked up by the fastest pace since July 2007.
However, preventing any further gains was a worse-than-expected manufacturing PMI. The flash estimate of the manufacturing sector showed a fall to 45.5 from 47.3 in March, below expectations of 48. It points to the sharpest contraction in the sector since May 2020, as new orders dropped, and employment stalled.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, is optimistic over the Eurozone’s economic recovery, but added:
‘However, a closer look reveals that growth is very unevenly distributed. For example, the gap between the partly booming services sector on the one hand and the weakening manufacturing sector on the other has widened further.’
Pound Euro Forecast: ECB Speeches to Boost the Euro?
Looking ahead, the Pound Euro exchange rate could see further movement with speeches from European Central Bank (ECB) policymakers. In the wake of mixed PMIs, any comments on how the central bank continues its tightening cycle could impact the Euro.
Meanwhile, the Pound looks to head into the weekend trading on market sentiment as investors continue to digest the worse-than-expected retail sales data.