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Pound Euro Exchange Rate Falls Back as UK Consumer Spending Slumps

GBP EUR exchange rate outlook

  • Pound Euro Exchange Rate Hovers Below 1.2 on Wednesday – Unable to reach key level
  • UK Business Confidence Improves – JP company Softbank buys out UK firm ARM Holdings
  • Update: UK Inflation Figures Solid – Inflation above expectations in June
  • Update: Pound Boosted by UK Employment – May unemployment rate below expectations
  • Forecast: ECB Meeting on Thursday – European Central Bank not expected to change policy

GBP EUR Exchange Rate Down as Retail Sales Fall

The Pound Euro exchange rate was trending in the region of 1.1984 on Thursday having fallen 0.3% following the publication of UK retail sales data.

Sales were shown to have fallen by -0.9% on the month in June, considerably more than the -0.6% slide forecast by economists.

(Previously updated 09:00 21/07/2016)

Pound Euro Exchange Rate Back Up on Wednesday

The Pound Euro exchange rate advanced once more on Wednesday after its Tuesday drop. Initially, Sterling was limp and lifeless following yesterday’s devaluation. However, after the latest UK unemployment report, the Pound was thrust higher.

May’s key ILO unemployment rate was unexpectedly low, at 4.9% with a high employment change of 176k. June’s jobless claims report indicated that less people than expected made new jobless claims in June, which was promising for June’s unemployment figures due next month.

However, UK markets remain uneasy as the data from these reports was collected well before the EU Referendum result. Forecasts for job figures from July onwards are dovish.

On Wednesday evening, GBP/EUR investors were readjusting their positions on the Euro as Thursday’s European Central Bank (ECB) meeting approached. The pair trended in the region of 1.1965 at the time of writing.

The Pound is currently around 3 cents stronger against the Euro than its post-Brexit low of 1.16. Investors will be looking to the latest UK data releases and the way new PM Theresa May handles the UK’s exit from the European Union for guidance on whether the Pound is likely to firm further in the weeks ahead.

(Previously updated 16:49 BST 19/07/2016)

Pound Euro Exchange Rate Drops on Tuesday

Markets were set on a profit-taking movement on the Pound throughout Tuesday’s session, as decent news for the UK economy failed to keep the Pound from falling.

Sterling’s losses were also accelerated in the afternoon, when the International Monetary Fund (IMF) lowered its UK economic growth forecast in response to the nation’s Brexit vote.

The Euro also remained sturdy in risk-off cross flows, despite ZEW’s latest economic sentiment surveys printing big drops since June’s report.

German sentiment worsened from 19.2 to -6.8, while the Eurozone’s economic sentiment plunged from 20.2 to -14.7. Some analysts claim that this indicates that the Brexit’s effects on the Eurozone economy could be worse than other recent data has suggested.

Despite this, the Euro shrugged off the news and is more likely to move with more direction in response to Thursday’s ECB meeting.

(Previously updated 10:52 BST 19/07/2016)

Pound Euro Exchange Rate -0.4% Lower, CPI Climbs

Although the rate of non-core UK inflation achieved its joint highest level of 2016 (0.5%, a level last struck in March) the Pound Euro exchange rate remained trending in a slightly softer position on Tuesday.

Pre-Brexit rising consumer price pressures would have stoked Bank of England (BoE) interest rate hike expectations, but with the BoE more likely to loosen policy than tighten it at the present time the report’s impact on Sterling was limited.

The GBP/EUR exchange rate was trending in the region of 1.1935, down 0.4% from the day’s opening levels.

(Previously updated 08:00 19/07/2016)

The Pound Euro exchange rate was sturdy on Monday following its Friday plummet, as news that UK tech firm ARM had been bought out by Japanese company Softbank increased hopes that the Brexit had not made UK business investments as unappealing as previously hoped.

Comparatively bullish comments from a BoE official also lent the Pound support over the course of European trading as they indicated that the BoE isn’t as set on adjusting fiscal policy in August as some had believed.

GBP/EUR climbed from the week’s opening levels of 1.1955 to fluctuate in the region of 1.1975 on Monday afternoon. The pair largely failed to hold above the key level of 1.2 and remained well below last week’s highs of 1.2097.

Sterling (GBP) Solid as UK Business Confidence Improves

The Pound was relatively sturdy across the board on Monday after news broke out that Softbank, a Japanese telecoms and internet company, had bought out UK tech firm ARM Holdings for £24bn.

While the news was seen as sad for some who valued the independence of ARM as a UK company on the world stage, it proved to be well received by UK markets as it improved the outlook for UK investment from foreign buyers.

Many investors had been worried that UK investment and business interest would plummet following the UK’s vote to leave the EU in late-June.

However, this move has been seen as proof that UK businesses were still appealing to foreign investors despite Brexit concerns dominating UK market movements lately. This was echoed by UK Chancellor of the Exchequer Phillip Hammond on Monday;

‘Decision by SoftBank to invest in @ARMHoldings shows UK has lost none of its allure to global investors – Britain is open for business’

Other analysts have even suggested that the purchase has likely been influenced by the Brexit – and Sterling’s drop in value. Head of Research at Investec, John Haynes, stated;

‘Assuming the bid price, Softbank is paying over 25% less in yen terms compared to over a year ago to acquire this crown jewel of UK, and indeed global, intellectual property. The devaluation of sterling will continue to provide interesting investment opportunities for overseas investors to buy UK assets, including central London property, at a discount.’

Euro (EUR) Sentiment Boosted Slightly as Turkey Coup Attempt is Thwarted

Global headlines were shocked on Friday by news that a large portion of the Turkish military had begun an attempt to remove President Recap Tayyip Erdoğan from his position of power.

However, by the end of the weekend the coup had reportedly been largely put under control. This boosted sentiment towards the Turkish Lira, as well as other emerging-market currencies in and around Europe.

Caught in the cross-flows of its close neighbours, the Euro also gained against other rivals and was able to maintain its sturdiness against the Pound, as markets relieved in a return to relative stability.

In addition, sentiment towards the Euro has been sturdy as investors do not currently expect the European Central Bank (ECB) to introduce any easing policies when members gather for July’s monetary policy meeting later this week.

While bets on July stimulus had been low regardless, bets dropped even lower last week, following the Bank of England’s (BoE) shocking decision to leave UK policy frozen until August.

Pound Euro Exchange Rate Forecast: UK Inflation Report Ahead

Tuesday’s session sees the release of this week’s most influential UK data report, and one that could set the tone of Sterling trade for the next few days.

The latest UK Consumer Price Index (CPI) report is forecast to have maintained inflation of 0.2% in June, as well as a yearly improvement of 0.3% to 0.4%.

However, previous forecasts have warned that pre-Referendum concerns on the possibility of a Brexit could cause June inflation to fall to near-stagnation levels.

As a result, if inflation scores below-expectations in its June report it would increase bets of dangerously low Q2 inflation – as well as possible bets of UK deflation in Q3 and beyond.

This could cause the Pound to plummet and even cause it to lose many of the levels it gained during last week’s session.

The Euro, on the other hand, will likely remain sturdy in the run up to Thursday’s European Central Bank (ECB) decision as investors adjust their positions

No stimulus measures are currently expected, with markets instead expecting the ECB to focus on the Brexit, as well as its possible effects on the Eurozone.

A bearish attitude towards the Brexit would likely cause the Euro to weaken. However, if the ECB indicates that the bloc has weathered the worst of the global market’s Brexit-jitters this would strengthen the shared currency and therefore cause the Pound Euro exchange rate to drop.