Pound euro (GBP/EUR) exchange rate rangebound despite upbeat UK retail data
The pound euro (GBP/EUR) exchange rate is listless today, despite signs of stabilising activity in the UK retail sector.
At the time of writing, GBP/EUR is trading at around €1.1671, showing little movement from today’s opening levels.
Pound (GBP) supported by stabilising retail sales
The pound (GBP) is being underpinned this morning by news that UK retail sales have begun to stabilise.
The Confederation of British Industry’s (CBI) distributive trades data printed significantly above forecast for March, coming in at 2. This marked the end of a 10-month stretch of declining sales, boosting the outlook for the key sector.
Martin Sartorius, Principal Economist at the CBI, commented:
‘The stabilisation of retail sales in March should give some hope that the sector’s downturn is bottoming out. The earlier timing of Easter will likely mean weaker year-on-year sales in April, but easing inflation should support retail spending going forward.’
However, Bank of England (BoE) policymaker Catherine Mann is due to deliver a speech later today. As one of the more hawkish members of the Monetary Policy Committee, Mann could advocate for keeping rates unchanged.
If she does so successfully, Sterling could gain strength. On the other hand – Mann recently softened her stance. If she indicates that interest rate cuts could be discussed, GBP may fall.
Euro (EUR) muted amid lack of data
The euro (EUR) is off to a flat start this week, as a lack of impactful data prevents any clear directional trade.
Furthermore, the common currency is likely remaining pressured by continued deliberations over the European Central Bank’s (ECB) path forward.
Investors have begun to speculate on the specific timing of interest rate cuts from the ECB. April has been considered, but it appears that a June rate cut is the most likely starting block for the ECB to unwind its policy.
Furthermore, surprise moves from other European banks have put a spotlight on the ECB’s communications. The Swiss National Bank surprised markets with the first rate cut last week, which has dialled up speculation that the ECB will soon follow suit.
Referring to the ECB’s rhetoric, Chris Turner, Global Head of Markets and Regional Head of Research for UK & CEE at ING, commented:
‘This remains mixed, with one hawk on Friday still talking up the chances of an April rate cut. Notably, money markets still ascribe a very low probability to such an outcome and we doubt that changes much this week given the absence of key data.’
Elsewhere, a quiet start to the week’s session is likely further limiting EUR, as investors appear hesitant to bet on any currency.
Pound euro exchange rate forecast: Pessimistic German data to dent euro?
Looking ahead for the euro, the core catalyst of movement is likely to be tomorrow’s GfK consumer confidence index.
In April, sentiment amongst German consumers is expected to have improved, but remain deeply negative. This could prompt weakness in the common currency as the situation in the Eurozone’s largest economy remains pessimistic.
For the pound, meanwhile, data releases in the short term are few and far between. This is likely to leave Sterling exposed to shifts in the market mood.
Owing to the pound’s increasingly risk-sensitive nature, a shift towards bullish trading conditions could strengthen GBP over EUR.