GBP/EUR Exchange Rate Edges Higher as Euro Traders Gloomy Ahead of Thursday’s ECB Interest Rate Decision
The Pound Euro (GBP/EUR) exchange rate edged higher today and is trading around €1.1281 at the time of writing.
The Euro (EUR) fell against the Pound (GBP) today following the Eurozone’s weaker-than-expected flash consumer price index (CPI) figures for May, which fell to 1.2% against the consensus 1.3% increase.
The annual flash Eurozone CPI figures for May also fell below consensus, further weighing on market sentiment in the Euro.
The single currency has remained generally subdued today, with analysts already in a gloomy mood ahead of Thursday’s interest rate decision from the European Central Bank (ECB).
Bert Colijn, a Senior Economist at ING Bank, was also downbeat, saying:
‘This will no doubt make some ECB board members a little hot under the collar, as pressure to take action is mounting.’
‘At the April meeting, it was already mentioned that price pressures remain uncomfortably low, which has certainly not improved since then. Expect a dovish tone from the ECB on Thursday.’
GBP/EUR Exchange Rate Rises despite Poor UK Retail Sales for May
The Pound managed to rise against the Euro despite the publication of the UK like-for-like retail sales figures for May, which fell to a worse-than-expected -0.3%, despite their 0.9% forecast growth.
Paul Martin, the UK Head of Retail at KPMG, said:
‘The extremely low growth online is real cause for concern, especially with almost a third of all non-food sales today being made online. This trend has continued to manifest itself over the last year and requires real focus from the retail community.’
Today also saw the UK Markit construction PMI figures for May contract at 48.6, falling below their forecast 50.5 – this left many Sterling traders feeling cautious as the UK begins to show increasing signs of slowing down.
Duncan Brock, a Group Director at the Chartered Institute of Procurement and Supply, commented:
‘A fragile dreariness descended on the sector this month with lower workloads leading to the fastest decline in purchasing of construction materials since September 2017.’
Prime Minister Theresa May, in one of her final acts before she steps down as Tory leader on Friday, has stated during US President Donald Trump’s state visit to the UK that the two nations could form a great partnership post-Brexit.
However, with a lack of any definitive decisions surrounding Brexit, many Pound investors have remained cautious.
GBP/EUR Outlook: Brexit and Tory Leadership Developments to Remain in Focus
Sterling traders will be looking ahead to the publication of the Markit services PMI figures for May tomorrow, which are expected to improve.
These will be followed by a speech from David Ramsden of the Bank of England, and with any dovish comments about the UK’s economy, this could see the GBP/USD exchange rate begin to sink.
The Pound Euro exchange rate will, however, more likely be driven by political developments, and with a question mark hovering about the next Tory leadership role, and Brexit still in a state of uncertainty, it is unlikely that Sterling should make any dramatic gains.