- Pound (GBP) struggled after retail sales unexpectedly fell
- BoE rate decision due on Thursday.
- Euro (EUR) weighed down by US Dollar strength
- German consumer confidence data due tomorrow
The Pound Euro (GBP/EUR) exchange rate is edging lower at the start of the week. The pair finished the previous week approximately at the same level that it started at €1.1639, after rising as high as €1.1709 earlier in the week. The pair trades roughly flat across June so far. At 05:45 UTC, GBP/EUR trades -0.05% at €1.1633.
The Pound had been steadily strengthening in the previous week until Friday when weak retail sales combined with concerns over the UK’s recovery from the pandemic sent Sterling lower heading into the weekend.
UK retail sales unexpectedly dropped in May. Retail sales declined -1.4% month on month in May as the re-opening of indoor hospitality hit spending at food shops. Analysts had been expecting growth of 1.6%. Delving deeper into the numbers, declining food sales were the largest contributor to the monthly decline. Food sales fell by 5.7%
Retail sales had surged 9.2% in April on a monthly basis as shops re-opened after the pandemic, although momentum seems to have slowed rather quickly.
There is no high impacting UK data due to be released today. Later this week the Bank of England will make its monetary policy announcement. If the central bank adopts a more hawkish tone the Pound could be boosted higher.
The Euro struggled versus the Pound for most of the week due to soft data and a significantly stronger US Dollar. The surprise hawkish shift by the Federal Reserve sent the greenback charging higher in the latter part of the week. The Euro trades inversely to the US Dollar.
Broadly speaking, the outlook in the Eurozone is improving as the vaccine rollout continues to ramp up amid the ongoing recovery from the third covid wave.
For Euro investors, the main focus this week will be on the PMI releases for both manufacturing and the services sector. Consumer confidence data tomorrow could also drive the Euro in the early part of the week.