- Pound (GBP) supported by BoE rate hike expectations
- UK retail sales in focus
- Euro (EUR) slips on USD strength
- Eurozone final CPI August due
The Pound Euro (GBP/EUR) exchange rate is heading higher for a third straight session. The pair settled up 0.09% on Thursday at €1.1717 after rising as high as €1.1764. At 05:45 UTC, GBP/EUR trades +0.1% at €1.1730. The pair is set to finish the week roughly at the same level that it started the week.
The Pound continued to see some follow through buying after the higher than forecast inflation print on Wednesday, which prompted speculation that the Bank of England could look to raise interest rates as soon as mid-2022. Previous expectations had been for the end of 2022.
Today the attention will remain on the economic calendar with the release of UK retail sales data.
Retail sales are expected to rebound in August after losing steam in July amid concerns for higher prices. Even so, consumer confidence remains elevated which could keep sales underpinned. Staycation’s shopping and socializing are expected to have been big across the summer, which could boost sales.
Analysts are expecting retail sales to rise 0.5% month on month in August after falling -2.5% in July. On an annual basis, retail sales are forecast to rise 2.7%, up from 2.4%.
The Euro has come under pressure this week, mainly owing to a stronger US Dollar. As expectations rise of a Fed tapering QE announcement the greenback has shot higher, hitting Euro demand.
The Euro did pull itself up off session lows on the news that the European Central Bank expects to hit 2% inflation target in 2025. The model also suggests that the European Central Bank plans to raise interest rates in just over two years’ time.
Attention will now turn to Eurozone consumer price inflation data, the final reading for August. Expectations are for inflation to rise 3% year on year, up from 2.2% in July. Core inflation is expected to confirm a 1.6% rise up from 0.7%.