- Encouraging UK statistics boosted the Pound (GBP) across the previous week
- Brexit talks saw little progress, but the Pound was unaffected
- Concerns the Eurozone economic recovery starting to stall is weighed on Euro (EUR)
- German GDP & IFO data due tomorrow
Despite falling -0.4% on Friday the Pound Euro (GBP/EUR) exchange rate managed to rise 0.67% across the previous week.
The pair is starting the new week on a cautious footing trading +0.07% at €1.1100.
Last week the Pound gained as UK macroeconomic data continued to improve. UK retail sales jumped 3.6%, almost double the 2% forecast. Furthermore, June and July’s retail sales total +26.2%. This is considerably ahead of the -23.3% drop in retail sales experienced in lockdown (March & April).
Brexit was in focus last week but failed to make any real impact on the Pound. Whilst the British government still says it is hopeful of a deal, EU Chief Negotiator Michel Barnier said he was disappointed after little progress was made.
The UK government is drawing together a worse case scenario plan of no trade deal Brexit coinciding with a second wave of coronavirus. This would be a double hit to an already fragile economic recovery.
There is little in the way of UK data this week. Investors will focus primarily on Bank of England’s Governor Andrew Bailey’s appearance and speech at the virtual central Banker’s summit Jackson Hole symposium.
The Euro is starting to lose its shine as questions grow surrounding the optimism tied to the Eurozone recovery which has supported the Euro. August PMI’s disappointed and concerns of a second wave are growing. There has been an alarming spike in Covid cases in the region driven partly by the movement of people during the summer holiday season.
Germany recorded its highest daily infection rate since April with over 2000 new cases. France also recorded the highest number of positive Covid tests since lockdown was eased mid-May. Meanwhile Spain reported 8000 new infections on Friday alone.
There is no high impacting Eurozone data due today. However, tomorrow sees the release of German GDP final estimates and German IFO business sentiment data.
