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Pound to Euro (GBP/EUR) Exchange Rate Falls Despite Weak German Trade Data in April

European Central Bank

GBP/EUR Exchange Rate Dips as Eurozone GDP Edges Slightly Higher in First Quarter

The Pound to Euro (GBP/EUR) exchange rate is currently trading around €1.12 this morning, with pairing down by -0.3% from the opening rates despite a slew of negative Eurozone economic data.

The Euro (EUR) managed to edge higher against Sterling despite Germany’s trade surplus shrinking to €3.2 billion in April, while exports slumped by 24%.

Carsten Brzeski, the chief economist for the Eurozone at ING, was mixed in his response to this morning’s data, saying:

‘Looking ahead, while April was the worst month ever in terms of most economic data releases, the month of May could become one of the best months ever. Judging from mobility data, the lifting of the lockdown measures should lead to a strong pick-up, even though this pick-up might be spread across May and June- at least in terms of domestic economic activity. As regards the export sector, there will definitely be a temporary rebound but structural challenges including trade tensions, Brexit and global supply chain disruptions, do not bode very well for the medium-term outlook.’

Today also saw the release of the Eurozone’s GDP figure for the first quarter, which beat forecasts and rose from -3.8% to 3.6% quarterly. Meanwhile, the year-on-year figure also improved from -3.2% to 3.1%.

As a result, the EUR/GBP exchange edged higher despite the Eurozone’s growth being only slightly smaller than previously estimated.

However, with the bloc’s economy expected to improve over the next few months, single currency traders have some reason for optimism.

Pound (GBP) Sinks Despite UK Retail Sales Offering a Glimmer of Hope in May

The Pound (GBP) struggled today despite last night’s publication of the BRC like-for-like retail sales report for May, which rose from 5.7% to 7.9%. As a result, this provided a glimmer of hope for Sterling investors as the British economy shows signs of a slow recovery after April’s plunge.

Helen Dickinson, the BRC’s chief executive, commented on the data:

‘Sales in May demonstrated yet another month of struggle for retailers across the country, despite an improvement on the previous month.’

‘Nonetheless, as the sun came out and restaurants lay dormant, food sales rose with consumers taking to their local parks for beers, BBQs and picnics. Clothing and beauty sales improved slightly on April, as people left their homes to meet outside with friends and family.’

Meanwhile, Prime Minister Boris Johnson is expected to address his cabinet on the possible easing of the UK’s Covid-19 lockdown measures. As a result, we could see the GBP/EUR exchange rate edge higher on hopes of a faster-than-expected recovery for the British economy over the next few months.

Furthermore, yesterday saw the daily number of Covid-19 deaths reported as being the lowest since the nation’s restrictions were implemented. Consequently, GBP could receive a boost from market confidence in the UK’s emergence from the Covid-19 crisis.

GBP/EUR Outlook: Could a Gloomy ECB Drag Down the Single Currency?

Euro (EUR) investors will be awaiting tomorrow’s speech from the European Central Bank’s (ECB) Vice-President Luis De Guindos. However, any downbeat comments about the Eurozone’s economic developments would prove EUR-negative.

Tomorrow will also be another day of lite UK economic data, with the UK RICS Housing Price Balance report for May expected to dip to -26%. However, with post-Brexit negotiations between the UK and EU remaining in focus, this is unlikely to affect the GBP/EUR exchange rate.

The GBP/EUR exchange rate could edge higher tomorrow, however, if a UK-Japan post-Brexit trade deal is struck. Furthermore, any indications that Downing Street could ease lockdown restrictions would also prove Pound-positive.