Pound Euro Exchange Rate Forecast (GBP/EUR) To Accumulate Following Weak Eurozone Retail Sales Data

Modified: Tuesday, 7 May 2013 09:02 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Forecast (GBP/EUR) To Accumulate Following Weak Eurozone Retail Sales Data

Trading volumes in the UK were extremely light during yesterday’s session thanks to the May Day Bank Holiday. However, it was ‘business as usual’ across Asia and large parts of Europe, triggering pronounced price action for many of the sixteen most-actively traded currencies.

Market participants spent the early part of yesterday’s session adjusting their positions following last Friday’s Non-Farm Payrolls data, which showed a healthier than anticipated level of job creation in the world’s leading economy last month. The showing of 165,000 new positions versus the broad consensus amongst economists that the print would show at only 145,000, sent investors scrambling to get involved in risk-laden asset classes at the end of last week. This caused global stock markets to spiral, prompting London’s broad-based FTSE 250 index to close up by 1.26% on the day and the usual risk-sensitive currencies to register decent gains, with the market moving in favour of the South African Rand as well as the New Zealand and Australian Dollars.

However, much of the positive lustre which ZAR, NZD and AUD had basked in during the latter part of last week evaporated during yesterday’s Asian session with the release of two negative data sets from the world’s second largest economy – China. Appropriately enough, April’s Chinese Leading Indicators figure for March led the way, showing a drop-off from February’s downwardly-revised showing of 99.98. Not long afterwards, this month’s HSBC PMI Services survey drove a stake into the heart of risk appetite, revealing a sharp contraction to 51.1 from March’s 54.3 print. The disappointing figure caused institutional investors to shift out of risk in their droves, sending the Pound to Australian Dollar exchange rate (currency : GBP/AUD) back up towards the 1.5200 level by the latter part of the European session.

Elsewhere, yesterday morning’s whole-of-eurozone Sentix investor confidence survey and the region’s latest retail sales figure both came in below expectations, causing renewed selling pressure on the single currency and sending the Pound to euro exchange rate (currency : GBP EUR) up to as high as 1.1883.

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