The Euro to Pound Sterling (EUR/GBP) exchange rate strengthened by more than 1% on Wednesday as positive Eurozone retail sales and unemployment data offered support to the single currency, also supporting was expectations that a deal will be reached between Greece and its creditors.
The Euro to Pound Sterling (EUR/GBP) exchange rate touched a session high of 0.7358
Earlier in the session the Pound Sterling was weakened by the release of weaker-than-forecast service sector purchasing managers index (PMI) data. Growth in the UK’s dominant service sector saw its sharpest slowdown in nearly four years in May, raising concerns that the UK’s economic recovery is softening.
According to the PMI compiled by Markit, activity in the sector that contributes the biggest percentage to the nation’s GDP slowed from the 59.5 in April to 56.5 in May. The figure remains comfortably above the 50 level that divides expansion from contraction. Nonetheless the figure was the lowest level seen since December.
As the session continued the Euro made gains as it received support from the release of better-than-forecast Eurozone retail sales data. The data released by Eurostat showed that sales across the region increased by 0.7% in April, a reversal on the -0.6% drop seen in March. The monthly increase was expected by observers. On an annual basis, retail sales increased by 2.2%, a strong rise from the revised 1.7% figure seen in the preceding month. The figure was better than expectations for a rise of 2%.
Also supporting the single currency was a separate report which showed that unemployment across the Eurozone fell to a three-year low.
Unemployment fell from 11.2% to 11.1% in April. Despite the fall, youth unemployment remains stubbornly high at 22.3%. The fall in unemployment was mostly down to the new record low jobless rate posted by Germany in April. Greece in comparison saw a jobless rate of 25%.
In the wider 28-member European Union, unemployment stood at 9.7% in the same month, unchanged from revised figures for March – meaning that 23.5 million people were out of work.
Greece in Focus
Sentiment towards the Euro is forecast to remain under pressure as economists keep a wary eye on events taking place in Brussels and Athens.
Greek Prime Minister Alexis Tsipras is due to meet with European leaders to try and thrash out a deal on economic reforms before Friday’s €300 million repayment to the International Monetary Fund (IMF). Optimsim that a deal will be reached by the deadline has increased to send the Euro climbing to its best level since the UK general election on May 7.