Pound Euro Exchange Rate Slides Despite Uptick in UK Retail Sales

August 19, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Slides Despite Uptick in UK Retail Sales

Pound Euro (GBP/EUR) Exchange Rate Slumps amid Poor UK Outlook

The Pound Euro (GBP/EUR) exchange rate dropped on Thursday despite UK retail sales figures printing above forecasts. The gloomy long-term outlook for the UK economy likely weighed on the currency pair. It’s likely that markets may have pared back bets on more aggressive rate hikes from the Bank of England, which may have also pulled GBP/EUR lower.

On the other hand, a sharp rise in German PPI may have limited any further losses for the pair.

At time of writing the GBP/EUR exchange rate was at around €1.1774, which was down around 0.4% from the morning’s opening figures.

Pound (GBP) Falls Despite Rise in July Retail Sales

The Pound (GBP) slumped against its rivals on Thursday despite above-forecast retail sales figures. The poor forecasts for the UK economy likely contributed to the currency’s falls, as well as the economic impact of widespread industrial action.

The boost in July’s retail sale may have helped to limit some more significant losses for Sterling on Thursday. Analysts highlighted the positive impact of online shopping deals such as Amazon Prime Day on the sector.


The long-term outlook for the UK’s retail industry remained downbeat, however. The Office for National Statistics (ONS) stated that sales would likely move on a downward trend in the coming months due to the impact of soaring inflation.

Martin Beck, chief economic adviser to EY ITEM Club, echoed the ONS statement:

‘With the squeeze on shoppers' spending power from high inflation intensifying and consumer sentiment low, the outlook for retailers still looks downbeat.’

Sterling may have also been pushed lower by fears of a recession for the UK after the 40-year inflation figures. Markets pared back bets on more aggressive action from the Bank of England (BoE) amid fears that too high a rate hike could provoke further slowdown.

Euro (EUR) Slips as German PPI Figures Rise at Record Rate

The Euro (EUR) saw mixed movements on Thursday, as it made headway against some of its poorly performing peers. The single currency slipped elsewhere however as German PPI figures added to predictions of a Eurozone recession.

German producer prices leaped at a record-fast pace in July as global inflation and the Russia-Ukraine war placed pressure on businesses. The German finance ministry cited the low gas supplies from Russia, higher energy prices, and supply chain disruptions as leading causes of the rise.


The figures also heightened fears of a recession in the trading bloc’s largest member. A rise to German bond yields may have limited significant losses for the Euro, however.

In its August report, a representative from the German finance ministry said:

‘The outlook for the further development (of the economy) is currently noticeably gloomy’.

The Eurozone energy supply crunch may also have weighed on EUR on Thursday. Russian supplier Gazprom has continued to limit flows to Germany through the Nord Stream 1 pipeline.

GBP/EUR Exchange Rate Forecast: Will PMIs Indicate Further Slowdown in UK Economy?

Looking to the week ahead for Sterling, the latest reading of the PMI for the UK’s services sector on Tuesday could pull the currency lower if they drop as forecast. The figures could add to the poor long-term forecast for the sector.

A predicted sharp drop in distributive trades figures could also weigh on the Pound on Thursday. August’s figures are expected to decline in the face of soaring inflation.

For the Euro, PMIs for Germany and the Eurozone could see the single currency fall if the indexes slip as forecast on Tuesday. The figures could also increase fears of an imminent Eurozone recession and weigh on EUR.

On Thursday, growth in the German economy is forecast to stall which may keep pressure on the Euro. Also on Thursday, a drop in German business confidence could cause EUR to slip.

Further developments concerning the Eurozone’s energy supply crisis are likely to prompt movement in the Euro next week.

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TAGS: Pound Euro Forecasts