Higher than Forecast Eurozone Retail Sales Leave the Pound Euro (GBP/EUR) Exchange Rate Flat
The Pound Sterling Euro (GBP/EUR) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of €1.0926.
Eurozone retail sales rose by a higher-than-forecast 1.1% in June, rebounding from May’s slump of -0.3%.
Euro sentiment rose as year-on-year, sales doubled to 2.6% from May’s reading of 1.3%.
Pound (GBP) Slides as UK Business Confidence Falls to Lowest Since November 2012
On Thursday morning, data revealed that the UK construction PMI declined once again in July, to 45.3.
This was up slightly from June’s ten-year low of 43 but still remained below the 50 no change value.
Markit revealed that there was a sharp drop in new work and purchasing activity, and business optimism slumped.
Commenting on the data, Group Director at the Chartered Institute of Procurement and Supply, Duncan Brock said:
‘Cost pressures continued in July as the weak Pound and short supply pushed up the price of materials and made progress on building projects more difficult still. In this turbulent month the impact was felt along all the supply chain with job seekers left out in the cold as employment opportunities dried up and hiring plans were frozen.
‘Moving into the second half of the year it will take the sector some time to dig its way out of this deep hole. As the autumn and the potential negative impacts of a no-deal exit from the EU threaten, any significant recovery is unlikely to be on the horizon until 2020. Construction optimism is at its lowest since November 2012, so there’s no time to lose in injecting some stability and certainty into the economy and Brexit plans before a recovery of months turns into years.’
Pound (GBP) Muted as BoE Slashes Economic Growth Forecasts
Meanwhile, on Thursday the Pound was left under pressure as the Bank of England (BoE) slashed its growth forecasts.
However, the bank left rates unchanged and did not follow other central banks by considering an interest rate cut.
The BoE now expects the economy to grow by 1.3% this year and in 2020, down from its previous forecasts of 1.5% and 1.6% growth.
This is providing the UK leaves the European Union with a deal, and the bank noted that in the event of a no-deal growth will be much slower.
Commenting on the effect of a no-deal Brexit, BoE Governor Mark Carney noted:
‘In the event of a no-deal, no transition Brexit, Sterling would likely fall, the risk premiums on UK assets would rise and volatility would spike higher.
‘No-deal as a crystallization of a bad economic outcome is not preferable to possibility of a better economic outcome.
‘Whatever outcome the country chooses it is always preferable to have a transition to it. That is consistent with the preferences, the aims of this government, and consistent certainly with the aims of businesses up and down the country.’
BoE Governor Carney Warns of ‘Real Economic Shock’ from No-Deal Brexit
On Thursday morning, Governor of the BoE, Mark Carney warned against a no-deal Brexit.
During an interview with the BBC, he warned that items including food and petrol would become more expensive in the event of a no-deal.
Sterling sentient was left dampened as he predicted the value of the Pound would slide in response to this ‘real economic shock’.
Pound Euro Outlook: Will a Higher than Forecast UK Services PMI Buoy GBP?
Looking ahead to next week, the Euro (EUR) is likely to fall against the Pound (GBP) following the release of the Eurozone’s Markit PMI composite.
If July’s PMI composite slumps to a lower than expected level, Euro sentiment could fall.
Meanwhile, Sterling could edge up following the release of the UK services PMI.
If July’s data shows the services sector expanded more than forecast, the Pound Euro (GBP/EUR) exchange rate could rise.