- GBP EUR Exchange Rate Returns to 1.10 – Pair trends near opening levels
- Euro Sold on ECB Uncertainty – Investors unsure of bank’s monetary policy plans
- GBP Forecast: UK Public Borrowing Ahead – As well as UK growth
- EUR Forecast: Eurozone PMIs in Focus – August data comes in next week
Amid a lack of key data due today, the GBP EUR exchange rate could end the week close to its opening levels. European Central Bank (ECB) uncertainty has helped the Pound to recover from its worst levels against the Euro.
GBP EUR opened on Monday trending at around 1.1002 and the pair returned to near the level of 1.1000 yesterday, after recovering from this week’s 2017 lows of 1.9393.
Pound (GBP) Sees Minimal Support from Retail Sales Results
The Pound didn’t see a notable benefit from recent key UK ecostats, despite the British currency being so cheap. Concerns about the long-term UK economic outlook and the Brexit process have kept the currency unappealing.
Britain’s July retail sales report was mixed when it came in yesterday and had little effect on Sterling trade.
The month-on-month retail report was forecast to drop from 0.6% to 0.2% and did beat expectations with its result of 0.3%. However, the previous figure was revised much lower to 0.3% too.
Yearly retail sales were more disappointing, slowing to 1.3% rather than the forecast 1.4% while the previous figure was revised down from 2.9% to 2.8%.
While some analysts reckon concerns about the UK pay squeeze have been overblown, other analysts are not impressed with the latest retail data amid concerns they could slow even further.
According to Mike Cherry, national chairman of The Federal of Small Businesses (FSB);
‘Confidence among small retailers has plummeted over the first half of the year. We’re worryingly close to flat, or even negative, retail sales growth across the UK. …
Inflationary pressure, Brexit uncertainty and delays to business rates relief measures are making it almost impossible for small retailers to invest and plan for the future.’
Due to disappointing retail and inflation data this week, Sterling saw no lasting benefit from Wednesday’s solid UK labour market report either.
Real wages also continue to fall despite rising wage growth, leaving the pay squeeze a potential long-term threat and giving the Bank of England (BoE) space to hold rates frozen at their loosest levels.
Euro (EUR) Sold from Highs on ECB Uncertainties
While recent Eurozone data has generally met or surpassed expectations, investors have become slightly concerned that the European Central Bank (ECB) may not discuss quantitative easing (QE) adjustment as soon as previously hoped.
This week, reports have emerged that ECB President Mario Draghi is not expected to deliver any fresh forward guidance at the Jackson Hole symposium on the 24th and 25th of August.
On top of this, the latest ECB meeting minutes detailed concerns among policymakers about the recent strength of the Euro.
As the Eurozone economy benefits strongly from exports, an expensive Euro can make Eurozone exports less appealing.
Analysts saw the message as a signal that if the Euro continues to rise in value, it could hinder monetary policy plans. According to Kristian Toedtmann from DekaBank in Frankfurt;
‘I see the ECB’s turn of phrase as a wish to prevent any further appreciation of the Euro. If the appreciation should continue, that would be a factor that would hinder the ECB in its normalization and force it to adopt a slower pace.’
The Eurozone’s latest ecostats failed to give investors any new reasond to buy the shared currency as ECB concerns weighed and investors sold the currency from its highs.
Eurozone inflation met expectations in July, coming in at 1.3% year-on-year and -0.5% month-on-month.
Unemployment rate data from The Netherlands and France improved in their latest results, but this didn’t boost Euro demand.
GBP EUR Exchange Rate Unlikely to Shift Today
The GBP EUR exchange rate may not see another notable shift in movement until next week’s most notable data comes in.
The pair looks to end this week relatively closely to its opening levels after recovering from near 2017 lows on Thursday.
This means despite all the key data published over the last week, GBP EUR saw ultimately flat trade.
Still, the Euro could be slightly influenced by Germany’s July PPI stats or the Eurozone’s construction output results today.
Any surprising political developments or comments from central bankers could affect the Pound or Euro before markets close too.
Failing that though, the next big events for Pound and Euro traders will be next week’s UK Gross Domestic Product (GDP) projections and the Eurozone’s preliminary August PMIs from Markit.
Potential news (or lack of news) from central bankers at the upcoming Jackson Hole symposium could also influence GBP EUR exchange rate movement.