Pound Euro Exchange Rate Could Tumble Today If Eurozone Retail Sales Data Beats Expectations

Published: Wednesday, 5 December 2012 09:00 BST - Written by Ben Hughes

STORY LINK Pound Euro Exchange Rate Could Tumble Today If Eurozone Retail Sales Data Beats Expectations

This morning’s data schedule is dominated by releases from the eurozone. Key amongst these is the latest whole of eurozone Retail Sales data, which is expected to show at a disappointing annualised level of -0.8%. This would be a repeat of September’s dismal showing. If the anticipated result comes to pass, then it appears highly possible that the single currency will come under selling pressure during the remainder of this week’s session. However, with such lowly expectations, the potential exists for some near-term euro-support, (even a print of -0.5% would be seen as ‘relatively good’, given the set-up). Such an outcome could send the GBP EUR exchange rate down towards October’s 7-month low of 1.2247. Consecutive closes below this key interim floor would send out a strong negative indicator for the pair, with the next significant level on the downside coming at 1.1756.

History often repeats itself in the currency markets – because of their risk-driven nature of the most trades, (the latest estimates from the World Bank suggest that over 90% of the money in these markets is put forward by speculators), levels which have been visited previously are significant. It is worth bearing in mind that on 1st December 2008 the GBP EUR exchange rate was sitting in the 1.2100s. By 30th December, 2008 the pair was trading in the 1.01s. A dramatic downside move of this nature is not anticipated during this year’s festive period, however with thin trading volumes guaranteed, pronounced volatility is a distinct possibility for GBP EUR.

The euro will be provided further direction by this morning’s German PMI Services sector survey for last month and the whole of eurozone PMI Services survey. Look out for a break below the key 1.2247 level later today – it could be the augur of further downside to come for GBP EUR.

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