The Pound (GBP) has made minor losses against the Euro (EUR) today, due to growing concerns about Brexit.
GBP traders have specifically been worried by signs that there may be no UK-EU customs arrangement in place before an October deadline.
This is when Brexit negotiations will technically end, leaving EU leaders to examine and ideally approve UK proposals.
UK Prime Minister Theresa May has categorically rejected the UK remaining in the EU customs union, which has alarmed traders ahead of the deadline.
(Last updated 17th May, 2018)
Risk of Returning UK Wage Squeeze Dragging Pound to Euro (GBP/EUR) Exchange Rate Down
The recent Pound to Euro (GBP/EUR) exchange rate decline is in danger of expanding over the coming week, when high-impact UK inflation rate data will be released.
Out on Wednesday, the ecostats are predicted to show rising inflation across the board in April, both for month-on-month and year-on-year readings.
Both base and core inflation levels are tipped to rise, which may put the rate of inflation above the pace of wage growth in April.
Such conditions will mean a return to wage squeeze conditions for UK consumers, which can have a negative effect on the retail sector as well as GDP growth.
Higher inflation may not force the Bank of England’s (BoE) hand when considering higher interest rates, so the GBP/EUR exchange rate could drop on such news.
Will Rising UK Retail Sales Spark GBP/EUR Exchange Rate Advance?
Although there is a risk of the Pound (GBP) falling against the Euro (EUR) on Wednesday, the GBP/EUR exchange rate could recover next Thursday on retail data.
Sales numbers for April will be out on the day and are forecast to show rising sales activity for both the month-on-month and year-on-year readings.
Such results could reassure GBP traders who are currently worried about a retail sales slowdown at the start of 2018 and push the Pound up against the Euro.
That said, a recent spike in crude oil prices, which translates to higher fuel costs, could cause the base readings (which include fuel sales) to show below-forecast growth.
Euro to Pound (EUR/GBP) Exchange Rate Forecast: Will Falling Eurozone PMIs Trigger Euro Losses?
The Euro (EUR) may have risen against the Pound (GBP) recently, but losses could be on the horizon when Eurozone PMI activity readings come out on Tuesday.
Data is expected to show falling manufacturing and services sector activity across the Eurozone for May’s initial estimates.
Additionally, a consumer confidence reading also out on Tuesday is also tipped to print poorly with a drop in consumer sentiment.
A combination of slowing economic activity in the Eurozone and declining consumer confidence could harm the Euro, leading to a clear decline against the Pound.
Are Greater EUR/GBP Exchange Rate Losses ahead on German GDP Data?
Another factor which could lead to the Euro (EUR) falling back against the Pound (GBP) next week will be the release of finalised German GDP figures on Thursday.
The readings for the first quarter are expected to show slowing levels of growth for the quarterly and annual readings, which may unsettle Euro traders.
The German economy is the largest individual economy within the Eurozone so a slowdown at the start of the year might be taken as a bad sign.