Foreign Exchange Rates ? GBP EUR Gains on Negative Eurozone Sales Figures

April 5, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Rates ? GBP EUR Gains on Negative Eurozone Sales Figures

The Pound Euro exchange rate (GBP/EUR) is 1.1451. The Euro Dollar exchange rate (EUR/USD) is 1.4169.

The Euro has come under significant selling pressure in the early part of today’s European session, following the release of February’s whole-of-Eurozone Retail Sales figures. These figures showed that prices unexpected contracted by 0.1% in February, against analysts’ expectations of a slight increase.

The levels that investors saw on GBP/EUR and EUR/USD as of close of business last night, were pricing in a 100% chance of a 25bps rate hike by the ECB on Thursday and an outside chance of the ECB electing to raise rates by 50bps. This morning’s sales figures will have dampened concerns over inflationary pressures in the European economy, causing interest rate projections to be downwardly revised.

Meanwhile, this morning’s UK PMI Services data far outstripped expectations when it showed at 57.1. Analysts had predicted that the survey would show that confidence over future demand for services in the UK had remained steady at the February level of 52.6. The significantly higher March reading will provide encouragement that the service sector, which makes up the majority of UK GDP, will be able to drag the economy back into growth again as 2011 progresses.

The Pound is now trading over a cent and a half above the five month low of 1.1295 that it reached on the last trading day of March. Tomorrow’s UK NIESR GDP estimate could bring further positive headlines for Sterling, if it provides an early indication that UK economic activity has returned to growth in quarter 1 of 2011.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts