Pound euro (GBP/EUR) exchange rate struggles as UK retail sales crater
The pound euro (GBP/EUR) exchange rate is treading water this morning, following news that UK retail sales dropped in April.
At the time of writing, GBP/EUR is trading at around €1.1735, showing little movement from the morning’s opening rates.
Pound (GBP) muted as retail sales slump
The pound (GBP) is muted this morning, in the wake of the latest UK retail sales data which weakened more than expected.
In April, retail sales dropped by 2.3%, significantly beyond anticipations of 0.4% decrease. This marked an additional fall from March’s drop of 0.2%.
Owing to a spell of wet weather in April, and the continued cost-of-living crisis, UK consumers shied away from spending.
Erin Brooks, European Retail and Consumer Lead at Alvarez & Marsal, commented:
‘It’s clear that shoppers were still not in the mood to spend, potentially dampened by an early Easter and a very wet April. With clothing retailers, sports equipment stores, games and toys stores, and furniture stores suffering the most.’
However, Sterling is managing to stay afloat due to optimistic readings of the UK’s outlook. With interest rate cuts on the horizon and inflation continuing to fall, analysts are expecting an improvement in spending during the second half of the year.
Euro (EUR) wavers amid lack of data
Due to a lack of data releases, the euro (EUR) is struggling to attract much support from investors this morning.
Attention is likely remaining on the European Central Bank’s (ECB) path forward with interest rate cuts. Policymakers have continued to join the chorus of suggesting a June rate cut is on the cards.
Yesterday, Isabel Schnabel added her voice to the mix, stating during an interview that a June rate cut was ‘likely’. She further added:
‘We’re currently seeing a slight revival of the economy in the euro area. At the same time, inflation continues to retreat. Therefore, there’s reason for hope that we’ll succeed in returning to price stability without experiencing a recession.’
Elsewhere, confirmation that the German economy grew in the first quarter of 2024 may be keeping the euro afloat this morning.
Pound euro exchange rate forecast: UK CBI data in focus
Looking ahead for the euro, the core catalyst of movement is likely to be Confederation of British Industry’s latest distributive trades data.
As a health check for the UK’s retail sector, forecasts of continued weakness in May could weigh heavily on Sterling.
For the euro, attention is likely to be focused on the latest German Ifo business climate reading.
Due to print on Monday, this index is expected to show an improvement in sentiment in May, rising to 90.3 from 89.4. This could boost the euro by showing that the Eurozone’s largest economy is continuing to recover after a prolonged period of weakness.
Elsewhere, risk appetite is likely to play a role in shaping the pound euro exchange rate. As the euro is a safer asset than the pound, a shift towards bearish trade may weaken the exchange rate.