The GBP to EUR exchange rate slipped by 0.25% on Thursday as UK data disappointed and dampened demand for Pound Sterling while Eurozone data impressed.
The Pound to US Dollar (GBP/USD) exchange rate was also trending in a softer position, just about managing to keep above 1.70.
Yesterday’s fairly flat Bank of England (BoE) meeting minutes took a toll on the appeal of the Pound and today’s less-than-impressive UK retail sales figures also contributed to the asset’s lower trajectory.
Sales including autos rose by just 0.1% in June, month-on-month, moderately less than the 0.3% gain anticipated and no way near enough of an increase to make up for May’s 0.5% decline.
On the year, sales including autos rose by 3.6%, less than the 3.9% estimate and down from a negatively revised 3.7%.
Sales excluding autos were a little more disappointing, detailing a 0.1% month-on-month decline.
That being said, retail sales were still up by 4.0% on a year-on-year basis, and on the quarter sales were the strongest for a decade.
After the report was published economist Rob Wood noted; ‘Strong second quarter retail sales point to another solid GDP growth figure. The UK is now cruising at above-trend growth rates, so the data are no longer universally surprising on the upside. But equally, they are not surprising much on the downside either’.
Meanwhile, the Euro was boosted by better-than-forecast manufacturing and services PMI figures for the Eurozone.
The GBP to EUR exchange rate dropped to a low of 1.2611.
Measures of the manufacturing and services industry for both the Eurozone and its largest economy, Germany, showed stronger than anticipated expansion in July.
This result helped to reduce concerns of a slowdown in the Eurozone’s superpower.
However, France remains a cause for concern. While the nation’s services sector measure unexpectedly pushed back above the 50 mark separating growth from contraction, the French manufacturing PMI slid further into contraction territory, easing from 46.2 to 47.6.
The French flash Composite Output index achieved a three-month high of 49.4.
Markit economist Jack Kennedy had this to say of the results; ‘The French private sector economy remained in reverse gear in July, dragged down by weakness in the manufacturing industry which offset a small improvement in services. Companies reported that further price cutting was insufficient to hold back the receding tide in new business, as the weak demand environment continued to stoke intense competitive pressures. PMI data remain consistent with quarterly GDP close to stagnation levels, as the economy continues to show little sign of turning around its recent sluggish performance’.
The Euro edged slightly higher against several of its rivals after the PMI reports were issued.
In other currency news, the GBP/USD pairing was struggling to hold above 1.70 prior to the publication of the US Markit Manufacturing PMI report. The data is expected to show a modest improvement.
If this prediction proves accurate we forecast that the GBP/USD pairing could extend declines.
Significant movement in the GBP to EUR exchange rate can be expected to occur tomorrow as the UK publishes second quarter growth data.
GBP to EUR & GBP to USD Forecast
UPDATED: 09:45 GMT 25 July, 2014
On Friday the GBP to EUR exchange rate began the local session in a weakened condition.
The Pound had softened in response to poor UK retail sales figures and the the Euro had been buoyed by signs of recovery in Germany.
The Pound Sterling to Euro pairing fell below technical resistance levels of 1.26 and held declines overnight.
However, during European trading the Pound managed to claw back some of its losses as German measures of business confidence disappointed expectations and UK Q2 growth data matched expectations.
The GBP to USD exchange rate also kicked off Friday in a softer position. While the UK’s on-target growth data did lend the Pound modest support, the British asset wasn’t able to climb back above 1.70 ahead of the publication of US Durable Goods orders figures. An upbeat result on that front could see the Pound to US Dollar exchange rate extend its five-day decline.
GBP to EUR Forecast –
Next week the main causes of GBP/EUR movement are likely to be Eurozone/German inflation data and German employment figures. Poor results will increase the odds of the European Central Bank brining in additional stimulus and could inspire a rebound in GBP to EUR trading.
GBP to USD Forecast –
US News to be particularly aware of next week includes the ADP Employment Change figure and annualised second quarter GDP figures. Any data adding to the case for a Federal Reserve rate increase will be US Dollar supportive and could weigh on the GBP/USD pairing.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.7012,
Pound Sterling,,Euro,1.2624,
Pound Sterling,,Australian Dollar,1.8013,
Pound Sterling,,New Zealand Dollar,1.9801,
US Dollar,,Pound Sterling,0.5879,
Euro,,Pound Sterling,0.7917,
Australian Dollar,,Pound Sterling,0.5549,
New Zealand Dollar,,Pound Sterling,0.5045,
[/table]
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