British Pound to Euro FX Rate Flounders on Lack of Data

August 18, 2017 - Written by John Cameron

STORY LINK British Pound to Euro FX Rate Flounders on Lack of Data

The pound to euro exchange rate crashed lower on Friday afternoon as a UK data drought left Sterling vulnerable to yesterday’s mixed retail sales figures and continued scepticism regarding the UK’s Brexit negotiations.

Year-on-year UK retail sales increased by 1.3% in July, significantly down from the previous month’s revised 2.8% figure and below the 1.4% consensus.

The month-on-month figure, however, was consistent with the previous month, printing at 0.3% (above the consensus figure of 0.2%).

Whilst the latter measure was positive, even if it was static, the statistics revealed that consumers are taking a more cautious approach; with purchases in every other sector apart from food declining (according to the Office for National Statistics).

Some economists have blamed July’s wet climate conditions for the drop recorded by clothing retailers, with high street stores noting a 0.5% drop in the sale of clothing and footwear.

The response to these figures overall was mixed, as some saw the fact that it remained stable at 0.3% as evidence enough that the UK consumer was resilient in the face of high inflation and low wages, whilst others claimed it as a sign of weakness.

Euro (EUR) Bolstered by Unexpected Eurozone Construction Figure

The Euro was bolstered this afternoon with the release of the Eurozone’s annual construction figure for June, which rose year-on-year from 2.7% to 3.4%, far above the forecast of 2.5%.

This release returned some positive sentiment to the Euro, as it represented healthy economic activity within the Eurozone and even raised the possibility that the upcoming Eurozone construction PMI print might also beat expectations.

With that being it for Euro-related data, eyes turn to the upcoming week.

EUR GBP Forecast: Volatility on the Horizon

There are a range of high-impact releases due next week, with the UK government’s borrowing figures due on Monday and GDP stats on Thursday.

The UK borrowing figures could result in a rally for Sterling if they reveal a shrinking deficit, as they currently forecast, but this could be reversed later into the week with the UK’s GDP stats.

The big data for the Euro will revolve around the German and Eurozone’s ZEW economist sentiment figures, due early in the week, followed by a speech by European Central Bank (ECB) President Mario Draghi, PMI prints and finally Germany’s GDP figures which are due on the Friday.

A great deal of these data sets aren’t entirely positive, however, so the EUR GBP exchange rate may well come under increased pressure, especially if Draghi’s speech fails to provide any indication regarding the proposed tapering of the ECB’s quantitative easing programme.

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TAGS: Currency Predictions Pound Euro Forecasts