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Pound Sterling to Euro Exchange Rate Outlook Concerning despite Boost in UK Retail Sales

European Central Bank

Pound to Euro Exchange Rate Rebounds from Worst Levels on UK Data and ECB Speculation

Due to a combination of this morning’s stronger than expected UK data and continued speculation that the European Central Bank (ECB) may need to become more dovish, the Pound Sterling to Euro (GBP/EUR) exchange rate has rebounded more strongly this morning.

After last week’s mixed movement saw GBP/EUR end very closely to its opening levels, near the level of 1.1159, the pair has seen sharper movements this week as Brexit jitters heighten.

Since opening this week, GBP/EUR has slumped. GBP/EUR touched on a fresh 2019 worst level of 1.1054 yesterday, and its worst level since December 2018.

While GBP/EUR has rebounded slightly from those lows, it only trends around half a cent higher around the level of 1.1102.

With just a few days left of the Conservative Party leadership contest, Brexit uncertainties remain in focus for the Pound to Euro exchange rate and its potential for further recovery may be limited.

Pound (GBP) Exchange Rates Supported as UK Retail Sales Show Surprising Jump

Following its broadly bearish plummet on no-deal Brexit fears in the first half of the week, the Pound (GBP) is recovering slightly today.

This is due to the selloff slowing and investors buying it back from its worst levels all year, but the latest UK data did to give Sterling demand a little boost.

Britain’s key June retail sales results were published today, and came in notably higher than expected in all major prints.

Monthly retail sales jumped from -0.6% to 1.0%, well above the expected -0.3%. The year-on-year figure climbed more than expected, from 2.2% to an impressive 3.8%.

Still, while these figures helped the Pound to recover further, its potential for gains is limited.

Concerns about a possible no-deal Brexit under Britain’s next Prime Minister have deepened, and fresh comments from the Office for Budget Responsibility (OBR) revealed that the group was concerned about a possible recession in the event of a no-deal Brexit.

Euro (EUR) Exchange Rates Struggle to Find Support Ahead of Next Week’s ECB News

Investors are hesitant to buy the Euro (EUR) this week, as markets await next week’s key Eurozone data and European Central Bank (ECB) policy decision.

Due to continued signs of weakness in the Eurozone, especially in Germany’s economy, speculation is rising that the ECB will need to be more dovish on monetary policy.

Some have even speculated that the ECB could ease Eurozone policy as soon as its July decision next week. While this is seen as unlikely, it is keeping pressure on the Euro’s appeal.

The weak German economic sentiment data published earlier in the week kept Euro investors anxious about Germany’s economic outlook, and while yesterday’s Eurozone inflation data beat expectations it was not strong enough to significantly dampen concerns of a more dovish ECB.

For now, movement in rivals, as well as anticipation for next week’s European Central Bank news is the focus for Euro investors.

Pound to Euro Exchange Rate Focuses on UK Politics until Key Eurozone News Next Week

Britain’s Conservative Party leadership contest is expected to reach its conclusion in the coming week, and Brexiteer Boris Johnson is widely expected to win.

With Johnson seeming a shoo-in to be Britain’s next Prime Minister, Pound investors will be increasingly focused on Johnson’s comments regarding how he plans to proceed with Brexit.

If Johnson’s stances continue to make a no-deal Brexit look more likely, the Pound’s potential for recovery will be highly limited.

However, the Euro may struggle to push GBP/EUR down much in the coming week either, unless upcoming Eurozone data impresses investors or the European Central Bank (ECB) is less dovish than expected.

The Eurozone’s July PMI stats on Wednesday could be highly influential, but aside from UK political news, the European Central Bank (ECB) policy decision on Thursday will be next week’s biggest event for the Pound to Euro (GBP/EUR) exchange rate outlook.