GBP/EUR: Pound Rises vs Euro Despite Record-Low German Unemployment
  • Euro (EUR) advances as German retail sales -5.3% vs -12% expected
  • Eurozone inflation expected to be very weak +0.2% yoy in May
  • US Dollar (USD) declines ahead of Trump’s speech on China
  • At 08:15 UTC, EUR/USD is trading +0.2% at US$1.11 > Real time exchange rate

The euro is gaining altitude versus the US Dollar (USD) for a fourth straight session on Friday. The Euro US Dollar exchange rate settled on Thursday +0.66% at US$1.1078.

At 08:15 UTC EUR/USD is trading +0.2% at $1.11 following upbeat German retail sales data and ahead of a key speech from President Trump.

German retail sales fell at the fastest pace since 2007, data revealed. However, the drop was no where near as bad as analysts had expected. Retail sales dived -5.3% month on month in April, down from -4% decline in March. However, the figure was significantly better than the -12% slump that had been pencilled in.

Whilst retail sales are a volatile indicator, April’s reading suggests that Europe’s largest economy is more resilient and weathering the coronavirus crisis better than expected. The data boosted optimism that consumption could pick up in the coming months. The stronger than expected numbers lifted the Euro.

Investors will now look ahead to Eurozone inflation data, which could in turn add pressure to the common currency. Inflation, as measured by consumer prices, is expected to increase just 0.2% year on year. Core inflation, which removes more volatile items such as food and fuel is expected to increase at 0.8% on an annual basis. This is well below the European Central Bank’s 2% target. A sluggish reading could raise the prospect of further action from the ECB when it meets next week.

The US Dollar is heading lower despite US – Sino tensions reaching boiling point. Tensions have been simmering between the two powers all week following China’s crackdown on democratic liberties in Hong Kong.

President Trump is due to give a speech today in response to China enacting a national security law in Hong Kong. He could impose sanctions on Chinese individuals, remove Hong Kong special trade status with the US or take other measures. His response could set the risk tome heading into the weekend.

In addition to Trump, Federal Chair Jerome Powell will also give a speech. However, given his numerous appearances over the past few weeks he is not expected to add anything new.


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