The Pound Sterling to Euro (GBP/EUR) exchange rate strengthened above the 1.27 level on Thursday as the currency pair found support from stronger than forecast UK retail sales data.
According to the Office for National Statistics U.K. retail sales rose 1.6% last month, compared to forecasts for a 0.3% gain. October’s figure was revised up to an increase of 1.0% from a previously estimated 0.8% gain.
On an annual basis, retail sales jumped 6.4% beating expectations for a 4.2% gain, after rising at an upwardly revised annual rate of 4.6% in October.
On Wednesday the Pound Sterling to Euro (GBP/EUR) exchange rate rallied back above the 1.26 level as economists raised their bets that upcoming UK jobs data will come in positively. Also of interest will be the minutes of the Bank of England’s December policy meeting minutes and Eurozone inflation data.
The Pound Sterling to Euro (GBP/EUR) exchange rate remained under pressure later in Tuesday’s session as positive economic data out of Germany and the Eurozone continued to offer support. The currency pair is forecast to experience volatility on Wednesday due to the release of the Bank of England’s December policy meeting minutes and Eurozone inflation data.
Earlier in the session the Pound Sterling to Euro (GBP/EUR) exchange rate weakened against the Euro and is forecast to reach a one-month low after a report released by the Office for National Statistics (ONS) showed that inflation in the UK slid to its lowest level since 2002.
Tumbling oil prices and ongoing price wars being fought by a number of leading UK businesses sent consumer price growth falling to just 1% in November. The figure was a decline from the preceding month’s figure of 1.3% and was below economist forecasts for a figure of 1.2%.
The ONS said that inflation declined as tumbling fuel prices, caused by the sharp 45% drop in oil prices brought down the costs of air and road travel down. Petrol prices in the nation fell by 5.9% last month. Food prices meanwhile fell by 1.7% as the major supermarkets intensified their price war ahead of Christmas.
If inflation falls below 1%, the Bank of England would have to write a letter of explanation to Chancellor George Osborne. Inflation as measured by the Retail Prices Index fell to a five-year low of 2%, down from 2.3%.
‘The inflation environment currently looks particularly muted with supermarkets still heavily engaged in a food price war and oil prices hitting a five-year low. We expect inflation to be essentially limited to a 1% to 1.5% range throughout 2015 as it only starts to firm gradually towards the end of the year,’ said Howard Archer, chief European economist at IHS Global Insights.
In addition, weighing on the Pound was the Bank of England’s stress tests, which showed that the Co-operative Bank failed and that Royal Bank of Scotland and Lloyds Banking Group were at risk if another economic downturn occurs.
Euro Exchange Rate Strengthens on Positive German Data
The Euro advanced against its major peers due to the release of a number of positive economic data releases, which suggest that the troubled currency bloc is beginning to show some sign of a recovery. The Eurozone’s balance of trade posted a bigger than forecast surplus in October of €24 billion, better than the €17 billion forecast.
ZEW economic sentiment data out of Germany smashed forecasts by soaring from a reading of 11.5 to 34.9 in December. Economists had been expecting a rise to 20.0.
Other positive news was better than forecast PMI data out of France, Germany and the wider Eurozone.
Pound Sterling to Euro (GBP/EUR) Exchange Rates
The Pound Sterling to Euro exchange rate hit a session high of 1.2721
The Pound Sterling to Euro exchange rate hit a session low of 1.2618
The Pound Sterling to Euro exchange rate was trading in the region of 1.2710
