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GBP/EUR Forecast: Pound to Euro Exchange Rate Falls as UK Retail Sales Disappoint

February 19, 2021 - Written by John Cameron

The Pound to Euro exchange rate has found itself struggling this morning on the back of disappointing data from the UK.

At the time of writing the pairing are currently trading at around 1.1528.

Pound (GBP) Struggles as UK Retail Sales Miss Forecasts

The Pound found its gains tempered this morning as retail sales data from the UK missed forecasts and fell dramatically more than expected.

The Office for National Statistics reported that retail sales slid 8.2%, a drop much larger than the 2.5% forecast and the worst drop since April of 2020 during the first wave of the coronavirus pandemic.

Deputy national statistician for economic statistics at the ONS, Jonathan Athow commented on the figures:

‘The latest national lockdown led to a sharp monthly fall in January’s retail sales, with April 2020 the only month on record to see a bigger slump. Department and clothing store sales were particularly affected this month.’

The Pound has found its losses limited however, as preliminary PMI’s from the UK for February showed that manufacturing and services beat forecasts.

Although the services and private sector PMI’s remain in contraction their declines are the softest seen in months.

Chris Williamson, Chief Business Economist at IHS Markit, said:

‘The UK economy showed welcome signs of steadying in February after the severe slump seen in January, albeit with business activity remaining sharply lower than late-last year due mainly to the ongoing national lockdown.’

Euro (EUR) Supported by Eurozone Factory Growth

The Euro was supported this morning by better-than-expected factory growth data from the Eurozone.
The IHS Markit Euro Area Manufacturing PMI jumped to 57.7 in February of 2021, beating forecasts of 54.3, preliminary estimates showed.

Furthermore, German manufacturing also had its own strongest growth in three years as the PMI jumped to 60.6 well above forecasts of 56.5.

Commenting on the preliminary PMI data from Germany, Phil Smith, Associate Director at IHS Markit said:
“February’s flash PMI results point to ongoing resilience in the German economy midway through the opening quarter, despite the country remaining under strict lockdown measures.’

‘It was encouraging to see manufacturing regain momentum in February after a slight setback in growth at the start of the year. Furthermore, the strong performance comes amid a backdrop of increasing supply-side pressures.’

GBP/EUR Exchange Rate Outlook: Eurozone Inflation in Focus

Looking to next week, Pound investors will be looking towards unemployment data from December of 2020. If the data beats forecasts of 5% Sterling could be supported.

Euro traders will be looking towards to key data releases surrounding GDP growth for Germany and final manufacturing PMI’s from across the bloc.

If the manufacturing PMI’s remain in growth territory EUR will find continuing support.

The Pound to Euro exchange rate will also be moved by any further coronavirus developments, with investors looking to Prime Minister Boris Johnson’s ‘roadmap’ out of lockdown on Monday 22nd.

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