The pound slipped lower versus the euro on Friday. The pound euro exchange rate dropped 0.1% to close at €1.1731. The pair saw relatively little movement across the week with the pound shedding a total of 0.1% versus the euro across the whole week. The weekly decline came following a fortnight of gains for sterling. The pound is edging lower versus the euro as trading kicks off for the new week.
The pound dipped lower at the end of last week following alarmingly weak retail sales data. UK retail sales fell sharply in December, as a Christmas shopping spree failed to materialise. Retail sales fell -0.6% month on month in December. This figure was well below the 0.6% increase that city analysts had forecast.
The weak data comes amid concerns over economic growth and the rising belief that the BoE could cut interest rates soon. November’s GDP unexpectedly contracted, and UK inflation dropped to the lowest in three years. Should data continue to disappoint across the coming weeks, the BoE could cut interest rates on 30th January. Current expectation for a cut sits at around 65%. Should UK data continue to disappoint, the odds of a cut could increase.
This week investors will look to UK wage data on Tuesday and business optimism data on Wednesday, which analysts believe could slip further into negative territory. UK PMI’s will be under the spotlight at the end of the week.
Euro Looks To ECB’s Policy Announcement On Thursday
No change in monetary policy is expected from the European Central Bank when they meet this week. However, the meeting could still inject some volatility into the common currency. The ECB is currently undergoing a policy review following the arrival of Christine Lagarde as President of the ECB. The central bank could change its inflation goal for the first time in 17 years.
Any signs of optimism among ECB policy makers could boost the euro on Thursday. However, a hawkish bias is unlikely.
However, should business confidence data and PMI data highlight continued weakness in the bloc’s economy, the euro could come under pressure.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 GBP = 1.13990 EUR
Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound.
Or, if you were looking at it the other way around:
1 EUR = 0.87271 GBP
In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.