- Pound (GBP) slips after 2 days of gains
- UK retail sales to show 1.5% rise
- Euro (EUR) rises despite strengthening US Dollar
- German PPI data due
The Pound Euro (GBP/EUR) exchange rate is edging lower after two straight days of gains. The pair settled +0.22% higher on Thursday at €1.1687, after briefing spiking through €1.17 to a level last seen in early April. At 05:45 UTC, GBP/EUR trades -0.1% at €1.1675. The pair is set to gain 0.2% across the week, its second straight week of gains.
The Pound found support in the previous session from encouraging Brexit developments and signs that the rise in covid cases is still not leading to a surge in hospitalisations. Government sources reportedly said that lockdown could end early if covid data continues to improve.
Attention is now turning towards UK retail sales. Sales are expected to rise 1.5% month on month in May. The data comes after UK retail sales surged 9.2% in April as non-essential shops in England reopened on 12th April. This was twice what analysts forecast as sales continued rising from March. The Bank of England will be keeping a close eye on retail sales amid expectations that households will be spending savings amassed in lockdown.
The data also comes after CPI data revealed that UK inflation jumped to 2.1% in May, beyond the BoE’s target. A strong rise in retail sales would build on the high inflation narrative.
The Euro extended losses on Thursday as the US Dollar kept on rising after the Fed’s surprise hawkish turn earlier in the week. The greenback surged to a fresh two month high as the Fed brought forward the likely start to hiking interest rates. The Euro trades inversely to the US Dollar.
Not even higher than expected core inflation data helped to boost the Euro. Core inflation rose to 1% year on year in May. This was above the 0.9% that analysts had penciled in. Headline inflation rose 0.3% month on month in May, down from 0.6% in April and in line with forecasts. On an annual basis inflation rose 2%, hitting the European Central Bank’s target.
The US Dollar extends gains today which could drag on the Euro. investors could now look to German producer prices for further clues on inflation.