Pound Euro Exchange Rate (GBP EUR) Slumps To 10-Month Low Following Dire UK Retail Sales Data

Published: Monday, 21 January 2013 09:00 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate (GBP EUR) Slumps To 10-Month Low Following Dire UK Retail Sales Data

Sterling has been one of the worst-performing of the sixteen most-actively traded global currencies since the start of 2013, giving up a full 3% of its value against the euro in the period since 3rd January alone.

Sterling had been under selling pressure as the New Year got underway thanks to investor’s concerns that the UK might be about to lose its highly-valued AAA credit rating. These fears followed the actions of the three major credit ratings agencies, all of whom placed Britain on ‘creditwatch’ during the latter part of last year. These worries picked up momentum last Tuesday when Fitch issued a public statement warning Britain’s policymakers that there was a tangible possibility that the AAA rating would go if the Chancellor of the Exchequer reveals in his March budget that the UK’s national debt is not contracting.

Last Friday morning saw a stake driven through the heart of the Pound with the release of December’s key UK Retail Sales numbers. Once again, investors holding Sterling-denominated assets were disappointed, with the figures showing a year-on-year increase of only just over half of the anticipated increase. The Christmas shop sales data points to an underlying lack of confidence from British economic participants which has the potential to further drag down Sterling during coming months.

The shift out of Sterling sent the Pound Euro exchange rate (currency : GBP EUR) tumbling to 1.1908 late on Friday. This represented the pair’s lowest trading level since 13th March, 2012. Further downside appears possible for GBP EUR unless the UK Prime Minister rapidly provides clarification on Britain’s future position as a member of the European Union. If Prime Minister Cameron’s heavy hints at a future referendum regarding Britain’s continued membership of the euroclub persist, then further broad selling pressure seems likely for the Pound, with the next significant support coming at 1.1756 – a level last visited towards the end of last February.

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