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Pound Euro (GBP/EUR) Exchange Rate Falls as UK Retail Sector Suffers

Pound and Euro coins on a five-Pound note.

Pound Euro (GBP/EUR) Exchange Rate Slides amid UK’s Downbeat Outlook

The Pound Euro (GBP/EUR) exchange rate is falling today. The UK’s poor economic outlook is likely weighing on the currency pair as markets digest the Bank of England’s (BoE) recession predictions. Additionally, fresh signs of a downturn in the UK’s retail sector could be pushing the pair lower.

GBP/EUR could also be seeing losses amid hawkish signals from the European Central Bank (ECB). A risk-off mood may be pushing the exchange rate lower.

Pound (GBP) Slumps as Retailers Warn of Slowdown

The Pound (GBP) is tumbling against its rivals today. The poor outlook for the UK’s economy may be contributing to Sterling’s losses today.

Speaking yesterday, Bank of England (BoE) policymaker Huw Pill signalled that the central bank was prepared to raise interest rates higher. Markets are concerned that further rate hikes could dent the UK’s economic growth after the BoE’s announcement that the UK had entered a recession.

Analysts are less certain that the central bank will push ahead with further aggressive hikes, however.

James Smith of ING said:

‘Its [BoE’s] policy statement and new forecasts signal very plainly that the Bank rate is unlikely to rise as far as investors expect over coming months. We expect a 50bp hike in December, so it’s unlikely to go above 4% next year.’

Further warning signs for the UK’s retail sector may also be pushing Sterling lower today. Retailer Marks & Spencer reported a roughly 24% fall in profits over the past year and warned of further pressures to come.

Finally, further turmoil in the UK government could pulling GBP lower. Cabinet minister Gavin Williamson resigned today following widespread allegations of abusive and threatening behaviour.

Euro (EUR) Boosted by Hawkish ECB Comments

The Euro (EUR) is firming against its competitors today amid a risk-off market mood. The single currency may also be benefitting from expectations of aggressive moves by the European Central Bank (ECB).

Recent comments from multiple ECB policymakers have seen markets increase bets on further interest rate hikes. Speaking on Tuesday, Joachim Nagel signalled that the ECB would ‘press ahead’ with further policy tightening.

Also on Tuesday, Luis de Guindos stated that further raising interest rate hikes was ‘the only possible way forward’. The ECB’s latest inflation survey also added to speculation amongst investors. The survey indicated that Eurozone consumers expected inflation to reach 7.3% in the next 12 months.

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