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Pound Euro Exchange Rate News: GBP/EUR Muted Despite Strong UK Retail Sales Data

December 17, 2021 - Written by John Cameron

GBP/EUR Mixed as UK Retail Sales Jump

The Pound to Euro (GBP/EUR) exchange rate is trading in a narrow range in the beginning of today’s session in spite of strong UK retail sales data.

At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.1749 with minimal market movement.

Pound (GBP) Muted Despite Retail Sales Overshooting Expectations

The Pound (GBP) is trading in a narrow range against the Euro (EUR) this morning despite UK retail sales printing higher than expected.

UK retail sales for November was forecast to print at 0.8%, down from an upwardly revised 1.1%, however sales growth overshot expectations by printing at 1.4%.

This is 7.2% higher than the pre-pandemic level of February 2020. The most significant contributions came from named-clothing stores and non-food stores, including toy, computer and jewellery stores.

Black Friday and the lead up to Christmas have been regarded as the main reasons for this surge in increased retail sale activity.

However, the recent implementation of Plan B by the UK government regarding the Omicron situation is likely to negatively impact the economy throughout December and into the new year.

Lisa Hooker, consumer markets leader at PwC, said:

‘A month is a long time in retail. The worst that high streets had to contend with in November was the aftermath of Storm Arwen. By the beginning of December, the effects of the Omicron variant had begun to impact across the UK, and footfall has already begun to drop in city centres.’

In addition, GBP are still digesting yesterday’s shock rate hike announcement by the Bank of England (BoE).

Euro (EUR) Directionless amid Disappointing German Data

At the same time, the Euro (EUR) is mixed against the Pound (GBP) this morning as Germany’s latest Ifo business climate index disappointed.

December business climate index fell for the sixth consecutive month, falling to 94.7, down from the previous 96.6 and below the market forecast of 95.3.

Ifo's president Clemens Fuest said that ‘the German economy isn’t getting any presents this year,’ implying that the disappointing figures will cause frustration for many businesses.

Moreover, rising cases of Omicron throughout Europe is causing further pressure on the single currency.

European Commission President Ursula von der Leyen, said:

‘Like many of you, I’m sad that once again this Christmas will be overshadowed by the pandemic.

‘We’re seeing an increasing number of people falling ill, a greater burden on hospitals and unfortunately an increase in the number of deaths.’

The evolving Omicron situation is weighing on EUR’s potential as the severity of the strain remains to be seen.

GBP/EUR Exchange Rate Forecast: Lack of Data Leaves GBP and EUR Vulnerable

Looking ahead, the Pound Euro (GBP/EUR) exchange rate is likely to be influenced by market movement and external factors due to an absence of notable data scheduled to be released for the rest of the week’s session.

Omicron developments are likely to act as a key catalyst of movement for both Sterling and the single currency.

GBP is likely to be impacted by reports of the UK government’s possible implementation of a ‘Plan C’ as the Omicron variant continues to surge throughout the country.

If ‘Plan C’ was to be instated, then further restrictions would hamper GBP’s potential as the UK economy would be in danger of reversing its gains shown in November’s retail sales data.

In addition, EUR will also be negatively impacted by the rising number of cases as Omicron rattles the single currency’s appeal.

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