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Pound Sterling Euro (GBP/EUR) Exchange Rate Slides as UK Retail Sales Worse than Forecast

January 18, 2019 - Written by John Cameron

GBP/EUR Exchange Rate Slips on Back of Poor British Retail Sales

The Pound Euro (GBP/EUR) exchange rate began to slip over the course of Friday as Brexit optimism failed to push the pound further, with the pairing trading at an inter-bank rate of €1.1339.

The release of some worse-than-expected UK retail figures on Friday morning saw the biggest monthly decline since March 2018.

Retail sales, excluding fuel fell by -1.3% in December, twice as far as expected from November’s revised figure of 1% growth.

The decline is likely due to Black Friday sales from November pulling forward Christmas spending, although the newer phenomenon has cause retail sales in December to decrease over the last four years.

Pound (GBP) Rallies against the Euro on Decreased Chance of No-Deal

The Pound Euro (GBP/EUR) exchange rate grew steadily over the course of Thursday with Sterling sentiment rising as a no-deal Brexit becomes less likely.

Despite this assumption keeping the Pound afloat, Theresa May wrote in an open letter to the opposition leader declaring that no-deal would still be an option:

‘I note that you [Jeremy Corbyn] have said that ‘ruling out’ no-deal is a precondition before we can meet, but that is an impossible condition because it is not within the Government’s power to rule out no deal.’

This undermined previous comments from Chancellor Philip Hammond, who informed business leaders that the option of a no-deal would be ‘taken off the table’.

Euro (EUR) Weighed Down by Weak Eurozone Figures

Thursday morning saw the release of the Eurozone’s Consumer Price Index figure for December, which revealed that inflation had remained in line with expectations at a steady rate of 1.6%.

Despite this, the Euro still struggled to make any significant gains on the Pound, as more weak data from the Eurozone over the course of the session dampened sentiment for the single currency.

Attempting to deny that this was a problem, European Central Bank (ECB) President Mario Draghi emphasised that it was ‘a slowdown, which is not heading towards a recession.’

GBP/EUR Outlook: Will the German Producer Price Index Influence the Euro?

Brexit is likely to remain the main catalyst for movement within the pairing at the start of next week, as Theresa May is due to present her ‘Plan B’ to Parliament followed by a debate and another vote, which is scheduled for Tuesday.

Sentiment in the Euro may be dampened by the release of the German Producer Price Index for December as the forecast suggests the figure will slip -0.1%.

The Pound Euro (GBP/EUR) exchange rate is likely to increase if there is an unexpected rise in the growth of UK average earnings for January from the previous 3.3% growth.

The UK ILO unemployment rate will also be released early in the session next week, with the forecast suggesting it will remain steady at 4.1%, although if this were to decrease further it could result in the Pound clawing back some of the losses suffered at the end of this week’s session.

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