Eurozone Retail Sales Growth Remained Stagnant
Retail sales across the Eurozone grew by 1.4% year-on-year (YoY) in December, the same level as the previous month. Economists had predicted a 0.1% uptick in sales. On a monthly basis, sales grew 0.3% as predicted, after contracting -0.3% the previous month.
UK Experienced Zero Inflation in 2015
A new forecast by the National Institute of Economic and Social Research (NIESR) presents a mixed view of the UK economy. The Institute has not revised its previous forecast, made in November, of GDP at 2.3% this year, however its outlook for inflation is just 0.3%. According to official data, there was no inflation in 2015 in the UK.
Proposed EU Deal Does Not Block Benefits to Migrants
The text of the deal being put to EU leaders has revealed that David Cameron has been unable to secure his ’emergency brake’ on in-work benefits for migrants. Instead, the deal proposed by Donald Tusk suggests a gradual increase in migrant benefits over a four-year period to reflect their growing integration with the UK job market.
German unemployment figures have printed better than expected, helping EUR/GBP to extend its already bullish lead. Pound Sterling, meanwhile, is being hampered by the slow progress of David Cameron’s EU membership reform negotiations.
EUR/GBP Strong as German Employment Rises 20,000 in January
Unemployment in Germany has fallen to its lowest level since reunification, dropping to 6.2% against analyst’s predictions of holding steady at 6.3%. 20,000 fewer people were out of work compared to the 8,000 predicted by a Bloomberg survey, taking the total jobless figure down to 2.73 million. Low oil prices, combined with high employment, is boosting German consumer spending, with the prospect of strong inflation helping drive Euro confidence today.
The Euro is currently bullish against most of the major currencies, with particularly strong gains of 0.6% against Pound Sterling, 0.7% against the Canadian Dollar (CAD), 0.8% against the Australian Dollar (AUD) and South African Rand (ZAR) and 0.9% against the New Zealand Dollar (NZD).
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading in the region of 0.7600.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: Pound Slumps on Faltering EU Negotiations
David Cameron will have to launch a new charm offensive over the next couple of weeks if he is to secure the reforms to Britain’s EU membership in time to call a referendum on the matter in the summer. Officials in Whitehall have told the Prime Minister that he needs to do more to sway the governments of the Visegrád group of countries: Poland, Hungary, Slovakia and Czech Republic. Their governments have already expressed opposition to changes in EU membership which would affect their citizens who are currently resident in the UK, many of whom are still able to vote in domestic elections.
The new advice comes after Cameron failed to agree a deal with European Council President Donald Tusk during a dinner at Downing Street on Sunday. However, Tusk did admit that the UK’s current situation would warrant the use of an ‘emergency brake’ system to suspend in-work benefits for migrant workers for four years.
The Prime Minister had been hoping to finalise negotiations with Tusk before the next European Council meeting, due to be held on the 18th-19th of February. With the current slow rate of progress casting doubt over that deadline, Tusk may convene a second summit in the first week of March so that the UK can still hold its EU membership referendum on the 23rd of June.
Pound Sterling is weak against the majority of currencies, with the GBP/EUR exchange rate trending between 1.3134 and 1.3247.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast: Markit PMIs Ahead
Another raft of Eurozone PMIs are due tomorrow during the European session, showing the progress of the services sector in Spain, Italy, France, Germany and the Eurozone. Composite PMIs will also provide an aggregate bird’s-eye view of economic performance. The UK also has a Services and Composite PMI due, both of which are expected to show a small slowdown in growth.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading between 0.7546 and 0.7616.