Pound Euro Exchange Rate News: GBP/EUR Rangebound as UK Retail Sales Figures Disappoint

Modified: Friday, 25 March 2022 14:35 BST - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Rangebound as UK Retail Sales Figures Disappoint

GBP/EUR Muted On Weak UK Retail Sales

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range today in response to underwhelming UK retail sales.

At the time of writing, the GBP/EUR exchange rate is trading at approximately $1.1971, with minimal movement from today’s opening levels.

Pound (GBP) Subdued on Lower-Than-Predicted UK Retail Sales

The Pound (GBP) is flat against the Euro (EUR) today following the publication of weak UK retail sales.

UK retail sales unexpectedly decreased by 0.3% in February, missing expectations for a 0.6% increase and slipping from a 1.9% expansion in January.

The Office of National Statistics (ONS) reported a 4.8% decline in non-store sales and a 0.2% contraction in alcohol and tobacco sales. This may be due to increased spending in pubs and restaurants as customers favour going out.

It may also hint at the UK’s cost-of-living crisis, which is negatively impacting consumer spending.

Last month, the consumer price index surged from 5.5% to 6.2%, reaching a 30-year high.

Inflation is expected to continue rising in the coming months, rising as high as 8% by April. This has the potential to further dent consumer spending.

In a bid to support British citizens as the cost-of-living squeezes finances, UK Chancellor Rishi Sunak published his spring statement on Wednesday.

As expected, Sunak postponed the planned National Insurance hike and cut fuel duty. However, according to the AA, this has done little on the ground thus far.

Luke Bosdet, the AA’s fuel price spokesman, commented:

‘Although we have to accept that, for many forecourts, the duty cut comes through with the next delivery of fuel, the size of the fall is very disappointing. I expect the Government will be watching very closely to see if pump prices reflect more of the fuel duty cut over the weekend.

‘The truth is that, while diesel wholesale costs have been climbing, petrol’s have fallen substantially since the peaks of 7/8 March. That should have brought a further 6p-a-litre cut in pump prices, effectively doubling the saving from the fuel duty cut.’

Euro (EUR) Directionless as German Business Climate Indicator Slumps to 14-Month Low

As the Eurozone’s largest economy, a weak reading from Germany’s Ifo Business Climate indicator is weighing on the Euro’s (EUR) potential today, leaving EUR flat against Sterling.

German business confidence has dropped to a 14-month low as Russia’s invasion of Ukraine damages the country’s economic outlook.

According to the Ifo research institute, ‘sentiment in the German economy has collapsed’ since the Russia-Ukraine war began.

In March, Germany’s business climate index dropped to 90.8, down from February’s 98.5 which is largely due to supply chain bottlenecks.

ING employee, Carsten Brzeski, said:

‘The risk is high that the economic implications of the war are much more of a structural game-changer for the European and particularly the German economy than the pandemic has ever been.

‘With high energy and commodity prices for a protracted period, possibly even energy supply interruptions, and an acceleration of deglobalisation, possibly Cold War 2.0, an export-oriented economy highly dependent on energy imports will suffer.’

Furthermore, peace talks appear to have come to a standstill as shelling across Ukraine continues. Due to the Eurozone’s close proximity to the conflict, it continues to place pressure on the single currency.

GBP/EUR Exchange Rate Forecast: Russia-Ukraine War to Remain in Spotlight

For the foreseeable future, Russia’s invasion of Ukraine is likely to continue driving volatility into both GBP and EUR, particularly if peace talks struggle to make meaningful progress in the near-term.

Into next week, the single currency may gain some traction from Germany’s preliminary inflation reading for March. The figures are expected to increase from 5.1% to 5.8%.

Should this print true, it may place more pressure on the European Central Bank (ECB) to raise interest rates this year.

On the other hand, Sterling will be left exposed to market movements and external factors due to a lack of UK economic data at the beginning of next week’s session.

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TAGS: Pound Euro Forecasts