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Pound Sterling Euro (GBP/EUR) Exchange Rate Flat as Eurozone Retail Sales Disappoint

July 4, 2019 - Written by John Cameron

Pound Euro (GBP/EUR) Exchange Rate Muted Following Surprise Fall in Eurozone Retail Sales

The Pound Sterling Euro (GBP/EUR) exchange rate remained flat and the pairing is currently trading at an inter-bank rate of €1.1139.

On Thursday, Euro sentiment was dampened as the Eurozone’s monthly retail sales fell by a lower-than-forecast -0.3% in May.

Eurostat showed that year-on-year, sales rose by a lower-than-expected 1.3%.

The unexpected decline in sales is another sign that consumer spending is struggling amidst a weakening economy.

Overall sales fell as sales of car fuel slumped -1.3% while there was a -0.5% drop in food, drinks and tobacco.

Euro (EUR) Flat as German Construction Activity Stagnates

German construction activity stagnated in June as a drop in home building weighed on overall activity.

The German construction PMI fell to the neutral 50 from May’s reading of 51.4.

Commenting on the data, Principal Economist at IHS Markit, Phil Smith said:

‘The latest figures show that the construction sector has lost all of its growth momentum, with the PMI slipping for the third month in a row in June to register in line with the 50 ‘no change’ mark. Only commercial activity increased, with the previously strong housing activity component having its first setback in eight months.

‘However, constructors remain in hiring mode and continue to scale up their purchasing activity, which reflects the still generally positive outlook for the sector. Firms foresee a continued appetite for new building projects over the coming 12 months, supported by the low interest rate environment.’

Sterling (GBP) as UK Services PMI Edges Down to Near Stagnation

Meanwhile, on Wednesday data revealed that the UK services PMI edged down to near stagnation in June.

Sterling remained under pressure as the services PMI fell from May’s 51 to 50.2 in June as business activity only rose slightly.

Added to this, the UK All Sector Output Index fell into contraction for the first time in 35 months.

Commenting on the PMI, Chris Williamson, Chief Business Economist at IHS Markit said:

‘Collectively, the PMI surveys indicate that the economy has slipped into contraction for the first time since July 2016, suffering the second-steepest fall in output since the global financial crisis in April 2009.

‘The worsening picture will put further pressure on the Bank of England to add stimulus. For policymakers to not loosen policy with the all sector PMI at its current level would be unprecedented in the survey’s two-decade history.’

Pound Euro Outlook: Will Disappointing German Factory Orders Weigh on EUR?

Looking ahead to Friday, it is likely the Euro (EUR) will slide against the Pound (GBP) following the release of Germany’s factory orders data.

If orders slump further than forecast in May, it could cause the single currency to slump.

Meanwhile, the UK Halifax house price data could provide Sterling with an upswing of support.

If house prices rise higher than expected, the Pound Euro (GBP/EUR) exchange rate could rise.

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