GBP/EUR exchange rate unable to climb as EU data impresses
The pound euro (GBP/EUR) exchange rate softened this morning, as stronger-than-forecast German factory data buoyed the euro (EUR). Gains are capped for the single currency, however, as Eurozone retail sales for the month of June disappointed.
At the time of writing, GBP/EUR is trading at €1.1634, marginally lower than this time on Monday.
Euro (EUR) faces mixed trading stimuli
The euro is trading in a narrow range against its peers today, as a combination of upbeat and disappointing domestic data leaves investors conflicted.
As the European session opened, German factory orders were revealed to have risen by 3.9% the month before last, rather than the 0.8% expected. The news lent tailwinds to the single currency in several exchange rates, inspiring hope that Europe’s largest economy is recovering.
LBBW senior economist Jens-Oliver Niklasch commented: ‘The increase in orders in June exceeded all expectations, even without major orders’; although he also cautioned that ‘more needs to come together to give the industry any real confidence.’
EUR optimism was subsequently undermined by June’s retail data from the wider Eurozone: sales were reported to have fallen by 0.3% rather than the 0.1% forecast.
Data agency Eurostat remarked that sales of food, drinks and tobacco had dropped 0.7%, preventing a two-month consecutive increase in retail activity – an event which has not yet occurred this year.
On the other hand, a silver lining exists in that confidence among households in July reached its highest level since early 2022.
As the day progresses, strong US dollar (USD) performance could pressure the euro, given the negative correlation between the currencies.
Pound (GBP) dented by headwinds as bearish sentiment increases
The pound (GBP) is struggling to attract support today as yesterday’s market selloff fuelled speculation that the Bank of England (BoE) will cut interest rates twice again this year.
A better-than-expected UK construction PMI does not seem to have lent any significant tailwinds to pound exchange rates: July’s reading printed at 55.3, above forecasts of 52.7. Elsewhere, the British Retail Consortium (BRC)’s monthly retail sales monitor met expectations, reversing from a 0.5% fall and printing at 0.3% for July.
Helen Dickinson, chief executive at the BRC, remarked:
‘The late arrival of British sunshine led to a better month for summer clothing and health and beauty products as shoppers prepared for days out with friends and holidays away.’
However, investors remain on guard as risk aversion limits gains. Geopolitical tensions were escalated over the weekend as Israel claimed to have successfully targeted Hamas leader Ismail Haniyeh following missile strikes on Iran. In retaliation, Iran-backed Hezbollah forces struck Israel, prompting further hostility.
GBP/EUR forecast: US data to influence currencies?
The pound euro exchange rate may trade this afternoon according to the outcome of the latest US trade balance. If the country’s deficit reduced, the ‘greenback’ could strengthen, pressuring the single currency and consequently boosting GBP/EUR.
Elsewhere, risk sentiment will likely continue to affect currencies’ performance. A protracted risk-off mood could help the euro to climb further given its comparative safe haven status.