- Pound (GBP) edges lower for a 2nd session after BoE negative rates hint
- UK retail sales expected to show growth slowing
- Euro (EUR) trades solidly despite anemic inflation
- German producer price inflation in focus
The Pound Euro (GBP/EUR) exchange rate is extending losses for a second straight session on Friday. The pair settled -0.2% on Thursday at €1.0946. At 05:15 UTC, GBP/EUR trades -0.1% at €1.0935. The pair is on track to gain 1.28% across the week after shedding 3.7% in the previous week.
The Pound came under pressure in the previous session and remain out of favour after the Bank of England took a step closer to negative interest rates. The central bank kept interest rates on hold as expected. They also warned on the growth outlook given the headwinds such as rising unemployment and Brexit. However, the bank, which had been sitting on the fence regarding negative interest rates has indicated that interest rates could fall below zero next year.
Today investor attention is back on the economic calendar with the release of retail sales. Analysts are expecting retail sales to pull back from July’s 3.6% increase to just a +0.7% month on month rise. Food sales expected to have declined last month owing to the Chancellor’s Eat Out To Help Out Scheme (not included in retail sales). Meanwhile clothes are expected to edge back towards more normal levels of growth. A strong figure could help boost the Pound.
The Euro is trading on the front foot versus its major peers. Inflation data yesterday confirmed that inflation in the bloc was weak declining -0.4% in August compared to the previous month. Whilst this is a worrying sign for the ECB, this was the final reading and it merely confirmed what was revealed 2 weeks earlier so there was no surprise for the market.
German producer price data will be in focus in the early European session. This measures inflation at wholesale level. Analysts are expecting PPI to -0.1% in August compared to July. This is down from 0.2% gains in the previous month, highlighting the lacklustre prospect for inflation.