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Pound Euro (GBP/EUR) Exchange Rate Inches Higher as UK Retail Sales Smash Expectations

May 24, 2018 - Written by John Cameron

UK Retail Sales Recover in April – Pound Euro (GBP/EUR) Exchange Rate Posts Small Gain

The Pound Euro exchange rate rebounded on Thursday, supported by a raft of fresh, upbeat data from the United Kingdom.

According to the Office for National Statistics, retail sales in the UK recovered in April with a rise of 1.5% year-on-year – up from the previous period’s upwardly revised 1.3% print and the expectation of a measly 0.1%.

On a monthly basis, retail sales recovered by a substantial 1.3%, smashing the previous period’s -0.5% decline and the forecast of a 0.4% rise.

This recovery was largely due to rebounding petrol prices – positive news after the downbeat performance in March due to the severe weather.

It should also give the Bank of England (BoE) more reason to raise interest rates at the next meeting – though many are still sceptical that this will occur given the fall in the rate of inflation.

Peter Dixon, Economist at Commerzbank said:

‘These figures show that the consumer is not dead and they keep the Bank of England on its toes. This is grist for the mill for those that think a rate rise is justified sooner, rather than later’.

Euro (EUR) Exchange Rates Bolstered by Chinese Seal of Approval

The Euro (EUR) did gain some support today – despite falling against the Pound - with investors pleased by news that China has signalled confidence in the single currency.

China’s Premier Li Keqiang stated that China remains a long-term and responsible investor in the Euro, with the hope that the currency remains strong and steady – despite the risk of an occasional sovereign debt crisis in the bloc.

This ultimately proved insignificant, however, with news that Italy’s President, Sergio Mattarella has accepted newcomer Giuseppe Conte as Prime Minister, paving the way for the two populist parties to form a coalition government.

Investors are slightly skittish regarding this news, with many concerned that the new leadership will engage in a spending spree, thus potentially endangering the Italian economy.

Pound Euro (GBP/EUR) Exchange Rate Forecast – UK Inflation on the Horizon

The outlook for the Pound Euro (GBP/EUR) exchange rate is slightly gloomy, with tomorrow’s 2nd Q1 GDP estimate liable to hurt demand for Sterling.

Analysts currently expect GDP growth to ease year-on-year from 1.4% to 1.2%, with the quarter-on-quarter reading expected to fall from 0.4% to 0.1%.

If this occurs then it could continue to push the BoE away from a rate rise at the next meeting.

An unexpected rise, however, could extend the GPB/EUR rally into the week’s end.
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