The British pound is lower against the euro on Friday.
- UK government borrowing rises to 100% of GDP
- May UK retail sales beat expectations
- EU Summit: Recovery fund remains elusive
- Pound-euro exchange rate lower by -0.81% this week
GBP/EUR was lower by 36 pips (-0.32%) to 1.1051 as of 3pm GMT.
The currency pair was steady just under 1.11 but suddenly dipped to just above 1.10. Yesterday the exchange rate lost -0.69%.
GBP: UK government debt spikes
The euro got the edge over the pound on Friday. The pound is on course for its fifth decline in six days in an ongoing stretch of weakness that started before and continues after this week’s Bank of England meeting.
UK retail sales for May surprised on the upside, rising +12.0% instead of the +6.3% expected but had little in the way of a positive impact on Sterling. On an annual basis, excluding auto sales and fuel, retail sales are down -9.8% on a year-over-year basis.
Some of the lack of positive impetus in the pound might stem from the UK’s growing debt burden. UK May public sector net borrowing was £54.5 billion versus £49.3 billion expected. That meant borrowing reached over 100% of GDP for the first time since the 1960s.
EUR: Leaders ‘not moving’ on EU Recovery fund
German Chancellor Angela Merkel had already set the bar pretty low for today’s EU Summit, saying she did not expect a deal on the EU Recovery fund until later in the summer. The red lines are clearly drawn out and so far nobody is stepping over.
France and Germany have supposedly put their backing behind the IMF’s €750 billion mix of loans and grants. The so-called ‘frugal four’ nations want the fund to be exclusively loans and for the total to be smaller. Spain and Italy as well as other likely beneficiaries of the fund are pushing for no new loans.
Merkel for her part, appears to understand the gravitas of the situation telling her fellow leaders that there will be “very, very difficult times” if the fund under-delivers.