Foreign Exchange Report : GBP EUR Refuses To Break Higher Despite Positive UK Retail Sales Data

Published: Friday, 18 November 2011 08:39 BST - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP EUR Refuses To Break Higher Despite Positive UK Retail Sales Data

The Pound Euro exchange rate (GBP EUR) is 1.1700. The Pound Dollar exchange rate (GBP USD) is 1.5787. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5801.

There was a much-needed boost for Britain’s ailing economy with the release of October’s UK Retail Sales figures yesterday morning. The British shop sales numbers showed a monthly increase of 0.6% - the same increase as had been seen in September. This surprised analysts, who had predicted that the figures would show that there had been a monthly contraction in UK retail sales last month.

Elsewhere, there was more dire news for the Eurozone, as the latest Spanish bond auction took place. The Iberian debt sale saw yields on 10-year Spanish bonds rise to 6.975% - their highest level since 1997, before the Euro was even a twinkle in Continental politicians’ eyes.

Interest rates above 7% on government debts are generally considered to be untenable in the medium term, so Spain’s fiscal position is teetering on the edge of the ‘danger zone’.

Given these developments, analysts would have expected the GBP EUR exchange rate to make a run at its 8-month high of 1.1785, which it reached last week. The fact that the pair traded resolutely in the 1.16s throughout almost all of yesterday’s session, provides a sternly bearish signal. As the old market adage states, ‘what should go up and doesn’t go up, can only come down…’

Today sees a relatively light schedule of tier one data releases, so relative risk appetite is likely to continue to determine levels in the market. If the ‘risk off’ environment continues to prevail, causing further losses for global stock indices, then expect the GBP USD rate to edge further downwards towards the 1.5500 level and the GBP AUD and GBP NZD rate to test higher.


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