- UPDATE: Surging Retail Sales Figures keep Pound Sterling Strong
- Pound Soars on Latest Ipsos MORI Poll – 55% support remaining in the EU
- UK Wage Growth Disappoints – Average earnings exc. bonuses slows
- Euro Weakens on Spanish Debt Concerns – Debt now 101% of GDP
- GBP/EUR Forecast: UK retail sales and ECB meeting account due Thursday
Pound Charges on Strong Retail Sales Figures
A 4.3% year-on-year (YoY) rise in UK retail sales in April has allowed the Pound to hold and build upon the bullish gains made yesterday. GBP/EUR is at a three-and-a-half-month high after low prices boosted consumer spending. Sales excluding fuel also performed well, advancing 4.2% rather than slowing from 2.6% to 1.9% as predicted.
According to Hargreaves Lansdown Senior Economist, Ben Brettell; ‘The UK economy’s glass was beginning to look decidedly half-empty, so today’s retail sales figures are a welcome tonic to the gloomy economic mood.’
Yesterday…
A strong lead for the ‘Remain’ camp in the latest EU referendum poll has allowed the Pound Sterling to Euro exchange rate to make bullish gains today. Persistent Eurozone deflation and growing tensions over the levels of Spanish debt further enhanced Euro (EUR) losses against the Pound (GBP).
Mixed UK Labour Market Data Eclipsed by Ipsos MORI ‘Brexit’ Poll
Pound Sterling may have wobbled after today’s UK data docket opened, but any uncertainties were quickly forgotten after the latest EU referendum poll data was published.
UK employment hit a record high, with the claimant count change figure printing positively below forecasts, although traders were disappointed by the slowing of average weekly earnings excluding bonuses.
According to PwC’s Chief Economist, John Hawksworth:
‘Today’s data confirms that the great UK job creating machine slowed somewhat in the first quarter of this year, with unemployment flattening off at pre-crisis levels and average earnings growth remaining relatively muted at around 2%.’
The ‘Brexit’ referendum once again stole focus, however. The latest poll from Ipsos MORI, commissioned for the Evening Standard, gave the ‘Remain’ campaign a major 18-point lead on the ‘Leave’ campaign, with support at 55% to 37% respectively. The figures revealed a swing towards supporting the EU from Conservative voters, although Gideon Skinner, Ipsos MORI’s Head of Political Research, noted that:
‘Remain has been boosted by a Conservative swing, but they are also more likely to change their mind, so in this volatile e election, with voters divided over the short and long-term impacts of their decision, nothing can be taken for granted.’
Euro Soft as Spanish Debt Levels Exceed GDP
With the Greek debt relief negotiations and another approaching bailout payment already weakening investor confidence, fresh concerns over Spanish debt have further sapped Euro appeal today. According to the latest figures from the Bank of Spain, first quarter national debt has now exceeded the value of the economy, totalling €1.09 trillion compared to 2015’s GDP of €1.08. According to the Spanish government, debt levels will still be 99.1% of GDP by year-end.
This is of particular concern given that Spain has already breached EU deficit rules for four years in a row, suggesting the government continues to struggle with the debt burden. In fact, despite the European Commission currently deciding whether or not to sanction the Spanish government for breaching the targets, acting Spanish Prime Minister Mariano Rajoy has commented that he could cut taxes further if he gets re-elected on the 26th of June.
‘We raised taxes at the start of our term in office, and we lowered both income and corporate tax in 2015,’ Rajoy explained to the Financial Times. ‘If tax revenues continue to rise, as they are doing now, we can plan another tax cut.’
The European Commission was already considering sanctions against Spain – as well as Portugal – although the decision has been suspended, with European Commissioner for Economic and Financial Affairs, Taxation and Customs, Pierre Moscovici has commenting that:
‘This is not the right moment economically or politically to take action against Spain and Portugal.’
The Euro was not helped by final April consumer price index figures, which showed core inflation was revised down to 0.7% from previous estimates of 0.8% and the actual non-core figure remained at a deflationary -0.2%.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: UK Retail Sales and ECB Meeting Account to Provoke Volatility
UK retail sales figures for April are predicted to show a rise on Thursday, both on the month and on the year, which could provide the Pound with some strength, although easing ‘Brexit’ concerns could prove to be more of a driver of GBP exchange rates.
The Eurozone is set to release current account and construction output figures, as well as the account of the latest monetary policy meeting from the European Central Bank (ECB).
Current GBP, EUR Conversion Rates
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading between 1.2760 and 1.2968, while the Euro to Pound Sterling (EUR/GBP) exchange rate is trending between 0.7710 and 0.7831.
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