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Euro Pound (EUR/GBP) Exchange Rate Climbs Despite Downbeat Retail Sector Data

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Euro Pound (EUR/GBP) Exchange Rate’s Gains Capped by Poor Eurozone Retail Data

The Euro Pound (EUR/GBP) exchange rate is trading higher today. A risk-off mood could be boosting the pairing. Additionally, bets on further interest rate hikes from the European Central Bank (ECB) may also be lending support to EUR/GBP.

The pairing may be seeing gains limited by disappointing Eurozone retail sales figures, however.

At time of writing the EUR/GBP exchange rate was at around £0.8851, which is up roughly 0.2% from this morning’s opening figures.

Euro (EUR) Bolstered by ECB Rate Hike Bets

The Euro (EUR) may be benefitting from a pullback in global risk appetite today. The single currency could also be finding support from ECB rate hike bets, although its gains may be capped by some downbeat data releases.

EUR may be seeing gains today off the back of hawkish comments from ECB President Christine Lagarde at the end of last week.

Speaking on Sunday to Spanish media group Vocento, Lagarde said:

‘We must continue to take whatever measures are necessary to bring inflation back to 2%. And we will do so.’

A below-forecast uptick in Eurozone retail sales may be limiting any upward movement for the Euro today. January’s sales rose by 0.3% versus the expected 1% increase. Analysts are anticipating a longer downturn for the sector.

Pound (GBP) Falls Despite Upbeat Construction Sector PMI

The Pound (GBP) is slipping today. Sterling could be struggling amid a cautious mood in the markets as well as softer BoE rate hike expectations.

Fading optimism over the UK-EU Northern Ireland deal may be weighed on GBP today. The UK government continues to await the DUP’s response to the proposed ‘Windsor Framework’.

A continued paring back of bets on further policy tightening from the Bank of England (BoE) may also be keeping pressure on the Pound. A 25bps rate hike has largely been already price in by markets with some experts now predicting a rate hike pause from the BoE.

An above-forecast PMI for the UK’s construction sector may be underpinning GBP today. The sector’s output returned to positive territory in February. The sector had been forecast to remain in negative territory.

EUR/GBP Exchange Rate Forecast: Will Lagarde Hint at Further ECB Rate Hikes?

Looking to the week ahead for the Euro, Wednesday is set bring a raft of Eurozone data releases. The third estimate of GDP growth for the fourth quarter of 2022 could pull EUR lower if growth stagnates as forecast.

On the other hand, the final reading of fourth quarter employment change figures could lend support to the Euro. The expected uptick could add to expectations of a tight labour market in the trading bloc.

Finally, a speech from ECB President Christine Lagarde could inspire further gains in the single currency if she reaffirms the ECB’s hawkish forward path.

The final reading of Germany’s February inflation figures could have a similar effect on EUR if they print as forecast. Inflation is expected to remain unchanged from January’s increase of 8.7%.

For the Pound, the latest retail sales data from the British Retail Consortium (BRC) could bolster Sterling. Sales are expected to have improved further in February.

Friday’s GDP data could also help to boost the Pound. The UK’s economy is expected to have expanded by 0.1% in January after December’s sharp contraction. The figures could also improve the sentiment surrounding the UK’s economy.