The Euro Pound (EUR GBP) exchange rate proved volatile over the holiday period as markets responded to disappointing UK Boxing Day high street sales and an otherwise quiet data calendar.
UK Boxing Day Sales Disappoint, Euro Pound (EUR GBP) Exchange Rate Fluctuates
Shoppers opted to stay indoors for Boxing Day 2017, leaving a notable drop in footfall for high-street sales.
Research group ‘Springboard’ reported that the UK’s Boxing Day sales fell by a whopping 5.2% this year, with shopping habits noticeably shifting to focus on November’s ‘Black Friday’ period instead.
Beyond this, consumers seem to instead be prioritising the online store rather than the busy high-street.
Diane Wehrle, Insight Director at Springboard discussed the figures:
‘What we have seen in the last couple of years is a structural shift in the Christmas trading period. Retailers have been discounting since before Black Friday and have had sales ever since, it rather takes the shine off the Boxing Day sales’.
Others, however, have pointed to the ongoing issue of soaring levels of inflation and weak wage growth, with consumers stuck feeling the pinch.
This news temporarily hurt demand for the Pound – thus allowing the Euro to take the lead – but ongoing concern that the European Central Bank (ECB) will move dovishly in 2018 did allow the Pound to bite back.
Euro (EUR) Exchange Rates Limited by Catalonian Elections and Christmas Flash Crash
Despite some stability on Wednesday morning the Euro suffered a large slump on Christmas day as a computer-driven sell-off prompted the single currency to fall some 3% in a very short space of time.
This drop was, however, hastily rectified, though some investors remained spooked about the Euro’s prospects, particularly with the recent vote in Catalonia seeing pro-independence parties come out on top.
Spain’s King Felipe VI has since called for an end to ‘confrontation and exclusion’, though it is very clear that the calls for independence are not going to go away any time soon.
Separatist leader Carles Puigdemont remains in exile in Belgium, however, with Spain still having an active warrant for his arrest.
If calls for independence continue to escalate then the risk of Catalonia leaving Spain, and thus the EU, will increasingly weigh on the single currency.
EUR GBP Forecast: German Retail Sales Ahead
Whilst trading is predominantly thin over the holiday period, Friday could see some movement on the release of Germany’s inflation figures, with consumer prices in December expected to rise year-on-year to 1.8%, up from 1.5%.
This could once again push the EUR GBP exchange rate into the Euro’s favour before 2017’s end.