Pound Sterling Euro (GBP/EUR) Exchange Rate Rises despite Gloomy British Retailers
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate edged 0.4% higher this afternoon. This left the pairing trading at around €1.1058.
The Pound continued to edge higher against the Euro on Thursday. Although, GBP gave up some of its earlier gains after downbeat data.
Data from the Confederation of British Industry (CBI) showed retailers remained pessimistic in the run-up to the relaxation of the lockdown.
The CBI said 62% of retail chains surveyed feared weak consumer demand would prevent a recovery after a slump in sales.
According to CBI chief economist Rain Newton-Smith:
‘Despite retailers working flat out to make sure they are safe and ready to open their doors, outside the grocery sector most retailers expect sales to be far below where they were this time last year.’
However, Pantheon Macroeconomics’ economist, Samuel Tombs noted the CBI did not always track official figures closely. This could mean that there could be a temporary recovery as shoppers made larger purchases that were delayed due to the coronavirus lockdown.
Pound Sterling Euro (GBP/EUR) Exchange Rate Rises despite Better Than Expected German Confidence
The Pound Sterling Euro (GBP/EUR) exchange rate edged 0.4% higher this morning. This left the pairing trading at around €1.1070.
The single currency struggled against the Pound on Thursday morning despite data showing German confidence improved more than expected.
The latest survey released by GfK showed confidence amongst consumers improved as we head towards July.
The easing of lockdown restrictions fuelled consumer optimism as the survey improved from -18.6 to -9.6 in July.
Commenting on the data, GfK’s consumer expert Rolf Buerkl said:
‘The extensive support provided by the economic stimulus packages, such as the announcement of a temporary reduction in VAT is certainly a contributing factor.
‘Provided that retailers and manufacturers also pass these reductions on to consumers, it can be assumed that one or two planned purchases will instead be made in the second half of 2020, thereby supporting consumption this year.’
However, despite the upbeat data, the Euro fell against the Pound as markets were largely driven by broad US Dollar (USD) strength today.
An increase in coronavirus cases in the US and fresh trade tensions undermined growing optimism for a global economic recovery.
Euro (EUR) Falls as US Threaten ‘Very Damaging’ Tariffs
Meanwhile, the single currency edged lower against the Pound as tensions between the bloc and the United States increased.
Brussels has criticised threats from Washington to slap $3.1 billion of European products with tariffs. The bloc has said these tariffs would be ‘very damaging’.
The United States announced it was considering further tariffs on Tuesday. This has prompted an angry response from the bloc as US-EU trade tensions increased.
The European Commission argued this would cause companies further harm as they have been battered by the coronavirus pandemic.
Commenting on this, an EC spokesperson said:
‘It creates uncertainty for companies and inflicts unnecessary economic damage on both sides of the Atlantic. By potentially targeting new products, the US is increasing this damaging impact due to the cost of new disruptions to supply chains for the products potentially subject to new duties.’
The announcement further complicates the already deteriorating outlook for transatlantic trade relations.
Pound Euro Outlook: French Consumer Confidence in Focus
Looking ahead, the Pound (GBP) could edge higher against the Euro (EUR) following the release of data from the Confederation of British Industry (CBI).
If the CBI’s data reveals the sharp decline in trades due to the coronavirus crisis has eased this month, it will support Sterling.
Meanwhile, Euro traders will be eagerly awaiting France’s consumer confidence data on Friday morning.
If June’s confidence rises higher than expected, it will buoy the single currency. This could leave the Pound Euro (GBP/EUR) exchange rate flat.