- Pound (GBP) retail sales rise at slowest pace since May
- Q4 GDP due on Friday
- Euro (EUR) supported by easing Italian political tensions
- German CPI up next
The Pound Euro (GBP/EUR) exchange rate is holding steady on Wednesday. The pair settled just 7 pips lower in the previous session in another subdued session which saw GBP/EUR trade within a familiar range. At 05:15 UTC, GBP/EUR trades roughly flat at €1.14.
According to the British Retail Consortium, retail sales rose in January at the slowest pace since the first covid lockdown when non-essential spending evaporated. Total retail sales declined 1.3% in the first month of the year which like for like sales rose 7.1% compared to a year earlier.
Delving deeper into the numbers food sales rose 7.5% whilst non-food sales dropped 5.6%. The data highlights the different impacts that lockdown has essential and non-essential retailer and also those with an online presence and those without.
There is no high impacting UK data due for release today, Bank of England Governor is due to speak later. Investors are looking ahead to the release of UK fourth quarter GDP data on Friday. Until then sentiment is expected to continue driving sterling.
Brexit news is hampering demand for sterling as relations between the EU and the UK have soured quickly since the turn of the year. Post -Brexit export delays are also proving to be an extensive problem with costs soaring and trade flows signififcsntly lower than what they used to be.
The Euro benefitted from the broad sell off in the US Dollar. Furthermore, the easing of political risks in Italy is also offering support to the common currency. Mario Draghi is continuing talks with the largest parties in Italy in an attempt to form a government. Talks are entering the last stages and party members will cast their votes over the coming 24 hours.
Data wise, German inflation data for January will be in focus. Expectations are for confirmation of the initial 0.8% month on month reading and 1% year on year. A stronger than expected number could lift the Euro.
