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Pound Euro Exchange Rate News: GBP/EUR Falls on Weak UK Retail Sales

April 22, 2022 - Written by John Cameron

GBP/EUR Collapses on Weak UK Retail Sales

The Pound Euro (GBP/EUR) exchange rate is falling today as the UK’s latest retail sales figures fell well short of market forecasts.

At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.1935, down roughly 0.7% from today’s opening levels.

Pound (GBP) Nosedives as UK Retail Sales Underperform

The Pound (GBP) is dropping against the Euro (EUR) today as a result of weak UK retail sales data.

In March, UK retail sales contracted by 1.4%. This is down from February’s revised 0.5% slump and significantly worse than the predictions of a modest 0.3% decline.

This was attributed to the UK’s cost of living crisis as consumers purchased less fuel and food amid surging prices.

The biggest contributor was non-store retailing, such as online sales, with a decline of 7.9%.

Meanwhile the UK’s manufacturing and services PMI preliminary figures for April also missed market forecasts.

The manufacturing PMI printed at 55.3, slightly up from 55.2 in March, though down from the expectations of 54. The services PMI is down from the previous 62.6 and market forecasts of 60, printing at 58.3.

Many experts believe high inflation pressures and the impact from the Ukraine crisis has caused demand to suffer.

Duncan Brock, Group Director at CIPS, said:

‘Concerns over the cost of living and the cost of doing business remain uppermost in the minds of private sector business with inflationary rises the second highest since 1998.

‘Prices of some commodities hit record highs, with costs for transport, energy and salaries showing no sign of easing as 84% of supply chain managers in manufacturing reported paying more for their purchases.

‘This is an unnerving result for those expecting more consistent recovery in the sector but with the slowest growth in new orders this year, pipelines of work are beginning to look emptier and threaten to affect production in the months ahead.

‘In services, consumers tightened belts and reprioritised spending affected by higher energy prices and national insurance rises impacting on additional spend.’

Euro (EUR) Climbs on ‘Stronger than Anticipated Footing’

The Euro (EUR) is rising against the Pound (GBP) this morning in response to upbeat PMI data.

The Eurozone’s services PMI preliminary figures for April printed at 57.7. This is higher than both the previous reading of 55.6 and the market forecasts of 55.

Similarly, the Eurozone’s manufacturing industry also expanded in April, with the factory index printing at 55.3. This is down from 56.5 in March but above the expectations of 55.

Despite the better-than-forecast figures, some experts remain wary.

Chris Williamson, chief business economist at S&P Global, said:

‘The Eurozone has […] started the second quarter on a stronger than anticipated footing, confounding consensus expectations of a slowdown.

‘However, the weakness of the manufacturing sector is a major concern as it points to an economy that is not firing on all cylinders.

‘Similarly, the ever-rising cost of living suggests that service sector growth could cool sharply once the initial rebound from the opening up of the economy fades.’

The Eurozone’s largest economy, Germany, revealed similar trends within its own manufacturing and services PMI preliminary figures, reaching 54.1 and 57.9, respectively. This is providing the single currency with some additional support.

GBP/EUR Exchange Rate Forecast: Investors Await BoE Bailey’s Speech

Looking ahead, the Pound Euro exchange rate is likely to be influenced by a speech from the Bank of England’s (BoE) Governor, Andrew Bailey.

Bailey is set to speak this afternoon. Should he strike a dovish tone, reiterating the recent attitude of the central bank, it may weigh on demand for Sterling.

Meanwhile, the European Central Bank (ECB) President, Christine Lagarde, is also expected to speak later today.

Will a hawkish tone, echoing some of her colleagues’ recent comments support the Euro?

On the data front, Germany’s Ifo business climate for April, scheduled for release at the beginning of next week’s session, is expected to slip and may place pressure on the single currency.

Moreover, the Ukraine crisis is likely to continue driving volatility in both GBP and EUR exchange rates.

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