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Pound Euro Exchange Rate News: GBP/EUR Wavers amid Troubling Data Across the Board

July 22, 2022 - Written by John Cameron

Pound (GBP) Wavers amid Mixed Data

The Pound (GBP) is struggling to find demand today after a flurry of data releases highlight the worsening economic climate.

Retail sales continued their slump, as June’s figures mark the second consecutive fall, a 0.1% MoM drop. This comes after a downwardly revised May reading of a 0.8% slide. With an expected boost in food sales thanks to the Jubilee weekend, it wasn’t enough as declining household goods and clothes offset any upside.

Helen Dickinson, chief executive of The British Retail Consortium has warned household spending will continue to be hampered by the cost-of-living crisis. She said:

‘Discretionary spending and particularly bigger purchases were put off as consumers become increasingly concerned about the future.’

‘Retailers are squeezed between higher costs and weaker demand, resulting in the most challenging trading period since the start of the pandemic.’

Meanwhile, PMI readings for the manufacturing and service sector printed higher than expected but still a slowdown from the previous month. Service PMI came in at 53.3 versus an expected 53. The drop from last month points to the softest expansion in the sector for 17 months. The manufacturing sector also beat expectations, but still worryingly highlight a continual slowdown in the UK economy.

Chris Williamson, Chief Business Economist at S&P Global, said of the data:

‘UK economic growth slowed to a crawl in July, registering the slowest expansion since the lockdowns of early-2021. Although not yet in decline, with pent-up demand for vehicles and consumer-oriented services such as travel and tourism helping to sustain growth in July.’

The Euro (EUR) Subdued as Recession Fears Grow

The Euro (EUR) is losing support despite the European Central Bank (ECB) raising interest rates for the first time since 2011. With soaring inflationary pressures threatening to tip the Eurozone into a recession, worrying data out of Germany and France today pile more pressure on the single currency.

An unexpected contraction in Germany’s manufacturing sector has alarm bells ringing of a looming recession. Manufacturing PMI data shows contraction for the first time since June 2020. With a whirlwind of downward pressures on the industry, including the Ukraine conflict, energy security, and inflation, troubling times are ahead.

Claus Vistesen, Chief Eurozone Economist at Pantheon Macroeconomics, has warned that Germany is now in a technical recession, and the Euro area could swiftly follow:

‘Manufacturing is bearing the brunt of the downturn in new orders and output, due to uncertainty over the war in Ukraine, energy security and ongoing supply side difficulties and high prices sapping demand.

Inflation pressures and stress on supply chains are easing, but only slowly, signalling that inflation will remain a problem in the near term even as the economy slows.
In other words, Germany is now suffering from a severe case of stagflation. It’ll get better, but not for a while.’

GBP/EUR Exchange Rate Forecast: Downbeat Market Mood to Keep the Pound Under Pressure?

After such a turbulent week of data, the Pound Euro exchange rate is now left open to the ever-souring market sentiment as the session closes this week.

Ongoing political uncertainty and social unrest will only weigh further on the economic strain the UK is under, the Pound could be set to slide.

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