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Euro Pound (EUR/GBP) Exchange Rate Edges Higher as UK Retail Sales Slow Down in May

Euro Pound

EUR/GBP Exchange Rate Rises as UK Economic Outlook Remains Uncertain

The Euro Pound (EUR/GBP) exchange rate rose by 0.4% after UK retail sales slowed in May after April’s strong surge following the easing of the UK’s lockdown measures. The pairing is currently fluctuating around £0.86.

CBI economics commented on the data:

‘Retailers reported sales volumes as being broadly average for the time of year in May, and they expect volumes to remain in line with seasonal norms next month.’

As a result, GBP investors have become more cautious about the outlook for the British economy, as the outlook for the UK economy still remains relatively uncertain.

Daily cases of Covid-19 in the UK continue to creep modestly higher, but daily deaths continue to remain relatively low compared to earlier this year.

However, there are growing concerns that rising cases of Covid-19 could delay the Government’s roadmap to further ease lockdown restrictions next month.

Euro (EUR) Rises as German Business Climate Survey Improves

The Euro (EUR) rose today after the latest German IFO business climate report for May beat forecasts and rose from 96.6 to 99.2.

Clemens Fuest, president of the IFO Institute, commented on the data:

‘The German economy is picking up speed. [German companies are] more satisfied with their current business situation.’

Consequently, growing confidence in the Eurozone’s largest economy has driven up the EUR/GBP exchange rate today.

Today also saw the release of the latest German GDP figure for the first quarter, however, which fell below forecasts by -1.8% quarter-on-quarter.

However, the outlook for the Eurozone’s economy continues to improve, with many key economies in the block further easing lockdown restrictions this month.

EUR/GBP Exchange Rate Outlook: Could Growing Hopes for the UK Economy Boost Sterling?

Euro (EUR) traders will be looking ahead to Thursday’s release of the latest German Consumer Confidence Survey for June.

Any improvement in the outlook for the largest economy in the Eurozone would be EUR-positive.

Pound (GBP) traders will be awaiting Thursday’s speech from the Bank of England’s (BoE) Vlieghe, a member of the Monetary Policy Committee.

Any dovishness about the outlook for the UK economy, however, could further undermine demand for Sterling.

The Pound could begin to head higher against the single currency this week, however, if the outlook for the UK economy continues to improve.