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GBP EUR Exchange Rate News: Pound Surges on UK Retail Data

Pound Euro exchange rate forecast

Wednesday’s GBP EUR exchange rate news saw the pair reaching a high of 1.1589 on Wednesday, moving further away from its recent three-year low, as the UK’s latest jobs data impressed.

The UK was shown to have added 172k positions in the three months to June, a better-than-forecast result, while average earnings increased and the unemployment rate held at 4.9%.

  • GBP EUR Exchange Rate News: Pair Hovers Around 1.16 – UK retail sales beat forecasts
  • Eurozone Economic Sentiment Improves – German sentiment still low, according to ZEW
  • Update: UK July Jobless Report Uninspiring – But helps GBP/EUR to hold above 1.15
  • Update: Thursday Session sees Key Movements – UK retail sales largely unaffected by Brexit vote
  • Forecast: Friday Unlikely to Cause Shifts – Eurozone August PMIs next week

GBP EUR Exchange Rate News: Pair Shoots Above 1.16 After UK Retail Sales

The Pound to Euro exchange rate surged higher on Thursday after an unexpectedly impressive UK retail sales report. The retail data was collected through July, meaning it was the first retail sales score to be recorded after the Brexit vote.

Despite many analysts expecting a drop, retail sales improved in every print. Monthly scores improved from -0.9% to 1.5% from June to July, whereas the yearly score jumped from 3.9% to 5.4%.

The increase in retail sales was largely due to hot July weather causing an increase in sales of summery clothing. Analysts speculate that high tourist sales, spurred on by a weak Pound, may also have boosted sales figures.

The Euro held steady throughout the day and was able to keep GBP/EUR away from its best levels, as Eurozone inflation came in at 0.2% year-on-year.

The European Central Bank’s (ECB) latest meeting minutes took a cautious tone, hesitant to indicate that stimulus would be expanded soon but also not able to count out the possibility of stimulus in the future. GBP/EUR held closely above the key level of 1.16 on Thursday afternoon.

(Previously updated 16:25 BST 17/08/2016)

GBP EUR Exchange Rate News: UK Jobs Helps Sterling Hold its Ground

The Pound to Euro exchange rate fluctuated just below the level of 1.1550 for most of Wednesday’s session, after making a solid recovery from Tuesday while investors bought GBP from its cheapest levels.

Markets were unable to draw any solid conclusions from the day’s UK jobs data, with the key employment figures having been collected from April to June, and July’s jobless claims not yet indicating any post-Referendum trends.

As a result, while the Pound was able to hold above its three-year-lows vs. the Euro, its recovery was limited and will be unlikely to advance further unless Thursday’s retail sales impress markets.

Some analysts have suggested that UK retail sales are more likely to show influence from the Brexit vote quicker than this week’s other results have. As a result, poor UK retail sales in July could cause GBP/EUR to fall back down towards 2016’s worst levels.

However, even if retail sales don’t influence Sterling movement much, the Pound to Euro exchange rate could still advance on Thursday if the Eurozone’s inflation figures or ECB meeting minutes disappoint markets.

(Previously updated 15:25 BST 17/08/2016)

The UK’s employment data prompted this response from IHS Global Insight’s Howard Archer; ‘It is premature to draw any firm conclusions from this… It remains likely that softening economic activity and heightened uncertainty will take a toll on the labour market over the coming months.’

Tuesday’s GBP EUR exchange rate news included the publication of July’s key British Consumer Price Index (CPI) report as well as Eurozone economic sentiment surveys from ZEW. With UK inflation up and ZEW surveys generally optimistic, the Pound Euro exchange rate fluctuated throughout the day.

The Pound could extend yesterday’s modest gains against the Euro if today’s UK employment figures detail a solid improvement in average earnings. However, should wage data fall short we can expect GBP to slide against the common currency over the course of the European session.

GBP/EUR is still a ways off from recovering to the week’s opening levels of 1.1582, having hit a new three-year-low of 1.1471 on Tuesday morning before Britain’s inflation report. Following the release, GBP/EUR fluctuated widely around the key level of 1.1500 for the remainder of the day.

Pound (GBP) Exchange Rates Recover from Worst Levels, but Future Forecasts Mute Advances

The Pound plummeted to lower than 1.15 against the Euro early Tuesday morning following Monday’s Sterling tumble, as investors awaited the first inflation results collected since the UK’s vote to Leave the European Union.

Some bears had expected national inflation to have already been affected by the Brexit vote. And sure enough, when July’s Consumer Price Index (CPI) figures were published on Tuesday morning yearly inflation had actually printed higher than expected.

While monthly CPI worsened from 0.2% to -0.1% as expected, the yearly figure unexpectedly climbed from 0.5% to 0.6%.

The BBC reported;

‘More expensive alcoholic drinks and hotel rooms also helped to increase the CPI rate, the ONS said.

The Retail Prices Index (RPI) measure of inflation rose to 1.9% in July from 1.6% in June.

Separate figures from the ONS suggested that the fall in the value of the pound since the UK’s referendum vote to leave the EU had increased the cost of imports for manufacturers.’

As some analysts have predicted that inflation could actually shoot up too quickly over the coming year due to a weak Pound and cause issues and lower wages in the long term, the Pound’s advances were limited. The Bank of England (BoE) would traditionally look to increase interest rates if inflation accelerated towards or beyond its 2% target, but the central bank has intimated that it is likely to overlook immediate increases in consumer price pressures and keep interest rates at record lows in order to support the domestic economic outlook. Such a stance is likely to keep the Pound under pressure.

Euro (EUR) Sturdy as August ZEW Surveys Show Improvement

Despite the volatile Pound’s influential fluctuations on Tuesday, the Euro remained in decent demand against most major currencies throughout the day thanks in part to the latest Eurozone economic sentiment survey results from ZEW.

The Centre for European Economich Research, or ZEW, publishes monthly confidence surveys for Germany and the Eurozone as a whole. After a disappointing set of figures in July, investors expected positive Eurozone PMIs to be reflected by stronger economic sentiment in August.

They were mostly right; Germany’s current situation survey improved considerably from 49.8 to 57.6, surpassing expectations of 50.2.

Meanwhile, the currency bloc’s economic sentiment survey improved from -14.7 to 4.6, indicating that the group of nations had largely brushed off Brexit anxiety.

Unfortunately, news that the Brexit could affect Germany more than other Eurozone nations may have held back Germany’s economic sentiment survey, with the score improving from -6.8 to a low 0.5 despite an expected improvement to 2.0.

Regardless, the Euro was solid from Tuesday morning through to the afternoon and was likely boosted by news that the bloc’s trade surplus had expanded beyond expectations in July.

Monday’s reveal that the European Central Bank (ECB) did not expect the Brexit to affect the Eurozone’s economic recovery also helped by setting an optimistic tone for the currency this week.

GBP EUR Exchange Rate Forecast: Thursday News to be Biggest Pound/Euro Mover

Tuesday’s UK inflation report has inspired fluctuations of Pound movement which could last through Wednesday, unless the day’s UK employment figures shock investors enough to inspire shifts.

Some analysts have predicted that the latest UK labour report will do little to inspire Pound movement, with the unemployment and employment change figures being from the three months leading into June.

These prints will not indicate what direction the job market has taken since the Brexit vote, and July’s jobless claim report may not yet indicate any strong Brexit-inspired trends.

However, if the change in jobless claims is far from the expected score of 9.0k, this could shock markets and cause Sterling movement depending on whether said shock is impressive or disappointing.

Thursday’s session is more likely to cause considerable Pound Euro movement, with UK July retail sales as well as Eurozone July inflation figures due for publication.

Analysts have suggested that retail sales are more likely to show an immediate change to the Brexit vote. As a result, Thursday may be the session to watch for those anticipating more GBP EUR exchange rate news.