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Pound Euro (GBP/EUR) Exchange Rate Steady, UK Retail Sales Fall on December

European Central Bank

GBP/EUR Exchange Rate Rangebound, BoE Rate Cut Fears Rise on Poor Christmas Retail Sales

The Pound Euro (GBP/EUR) exchange rate held steady today, with the pairing currently trading around €1.173 after December’s UK retail sales report undercut forecasts and fell by -0.6%, adding yet more pressure on the Bank of England (BoE) to slash its interest rates on the 30th January.

Ed Mon, Associate Director at Fidelity International, commented:

‘The picture we’re seeing from trading figures is that shoppers reined in spending in the months ahead of Christmas, with the December monthly figure showing there was no festive bounce to make up for lost ground.’

After this week saw several of the BoE’s policymakers and rate-setters commented that they would back a vote on further stimulus measures from the central bank, the GBP/EUR exchange rate has remained subdued as the outlook for the British economy dims early into 2020.

The Pound’s (GBP) gains have been capped by concerns over Brexit, however, after EU Commission President Ursula von der Leyen said this week that negotiating all aspects of the UK’s future with the bloc by the end of this year would be ‘basically impossible’.

With fears of a no-deal Brexit rising, the GBP/EUR exchange rate is likely to remain subdued into this weekend.

EUR/GBP Exchange Rate Steady, December’s Eurozone Inflation Report Fails to Impress

The Euro (EUR) failed to gain against the Pound (GBP) today following today’s release of December’s Eurozone inflation report, with the month-on-month figure confirming forecasts and holding at 0.4%, while the year-on-year figure also remained unmoved at 1.3%.

However, as the Eurozone’s inflation report continues to undershoot the European Central Bank’s (ECB)expectations of 2%, today’s figure has offered little in the way of uplift for the EUR/GBP exchange rate.

The EUR has retained some of yesterday’s gains, however, after it was revealed that the ECB’s outlook in December was surprisingly upbeat, with the bank commenting that last year’s data had pointed to a ‘stabilization in euro area growth’.

Euro investors are also keeping a close eye on US-China trade developments after the two superpowers signed the ‘phase one’ agreement this week.

Any further doubts over the two nation’s relations in the meantime could hold back the foreign trade-reliant German economy, and further dampen market appetite for the single currency.

GBP/EUR Outlook: Could Further Brexit Hurdles Weaken the Pound?

Pound (GBP) traders will be looking ahead to Tuesday’s publication of November’s ILO unemployment rate report for November. As the figure is expected to rise, however, we could see the GBP/EUR exchange rate dip as BoE rate cut fears rise.

Euro (EUR) investors, meanwhile, will be awaiting Monday’s publication of Germany’s PPI figure for December, with the month-on-month figure expected to rise from 0% to 0.1%.

Brexit developments will remain in the spotlight next week, with any amendments to Prime Minister Boris Johnson’s Withdrawal Agreement Bill from the House of Lords potentially altering the direction of the UK and EU’s future.

Any further obstacles to a trade deal, however, would prove detrimental to the Pound.