Following better-than-expected UK Retail Sales Pound Sterling (GBP) has trended higher against rivals, while the Euro (EUR) remains on a weaker footing today.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Slumped after Dovish ECB Minutes
A stronger-than-expected Eurozone Current Account surplus initially helped to bolster the Euro (EUR) yesterday, as it rose from 30.3 billion to 41.4 billion Euros in December. This seemed to suggest that the currency union was in better economic shape than previously thought, although this was ultimately not enough reassurance to keep the single currency on bullish form for long.
Traders were more concerned with the latest European Central Bank (ECB) minutes, as policymakers were confirmed to have taken a generally more dovish outlook at the January policy meeting. Undermining the impact of ECB council member Ewald Nowotny’s recent comments, which had suggested that market expectations were overdone, this encouraged hopes of fresh easing measures to come in March. As a result the Euro to Pound Sterling (EUR/GBP) exchange rate slumped sharply on Thursday morning.
Stronger UK Retail Sales Boost Pound Sterling (GBP) Today Despite ‘Brexit’ Concerns
Confidence in the Pound (GBP), however, has been somewhat more muted ahead of the weekend as ‘Brexit’ uncertainty continues to build. Prime Minister David Cameron is attempting to secure agreement on proposed reforms at a summit of European leaders, although opposition appears to remain. Should Cameron fail to achieve consensus at this stage the resultant UK referendum is unlikely to come in June, keeping the longer-term outlook of Sterling more muted.
However, January’s UK Retail Sales data proved decidedly more encouraging than investors had expected. Following the more disappointing December retail session, sales jumped from -1.4% to 2.3% on the month, while annual sales also accelerated by a bullish 5.2%. Indicating more robust consumer demand this stronger showing saw the Pound making fresh gains, pushing the EUR/GBP exchange rate lower.
EUR/GBP Exchange Rate Forecast: Rising US Inflation Predicted to Spur Euro Downtrend
Later today the Euro may cede its gains if the January US Consumer Price Index is found to have increased as bullishly as expected. Pundits are anticipating at 1.3% uptick in inflationary pressure, a result which would shore up the US Dollar (USD) and consequently weaken the common currency thanks to the negative correlation of the Euro to US Dollar (EUR/USD) exchange rate.
February’s Eurozone Consumer Confidence survey may also prompt a EUR/GBP exchange rate downtrend, as forecasts suggest that sentiment will have slumped further from -6.3 to -6.6 on the month. Further signs of economic weakness within the Eurozone are only likely to encourage the ECB to take action in March, a prospect set to soften the Euro against rivals.
Current EUR, GBP Exchange Rates
At the time of writing, the Euro to Pound Sterling (EUR/GBP) exchange rate was trending lower at 0.7750, while the Pound Sterling to Euro (GBP/EUR) pairing was making limited gains around 1.2902.