Pound At 3 Week Low vs. Euro Following Dip in UK Retail Sales
  • Pound (GBP) falls after party gate report released
  • UK manufacturing PMI final reading due
  • Euro (EUR) rises on weak USD, mixed data
  • EUR looks to German retail sales, Eurozone PMI

The Pound Euro (GBP/EUR) exchange rate is holding steady on Tuesday after steep losses in the previous session. The pair fell -0.4% in the yesterday, settling at €1.1965 towards the low of the day. At 05:45 UTC, GBP/EUR trades +0.02% at €1.1967.

The pound fell versus the euro but remained resilient versus the US dollar following the release of the “party gate” report. The report highlighted a series of failures within the government, which Prime Minister Boris Johnson apologized for and said that he will fix. So far, Boris Johnson has managed to cling to power. For now, it looks as if the PM will hang onto power.

Looking ahead, UK manufacturing PMI data will be under the spotlight. Activity in the manufacturing sector is expected to have slipped at the start of the year after a strong finish to 2022. The final reading of the PMI is expected to confirm the preliminary reading of 56.9, down from 57.9 in December. The level 50 separates expansion from contraction.

The Euro rebounded on Monday after selling off last week. The common currency rose, despite mixed data, on the back of a weaker US dollar. The Euro trades inversely to the greenback.

Eurozone GDP showed that that the economy continued to grow in the fourth quarter despite Omicron. A growth rate of 0.3% quarter on quarter was inline with forecasts, even as Omicron, supply chain issues and inflation continue to drag on expansion. The data comes after German Q4 GDP which revealed that the economy contracted in the final three months of the year.

German inflation fell in January, but by less than forecast as the effects from the VAT reversal are offset by surging energy prices. German inflation dipped to 4.9% year on year, down from 5.3%.

Looking ahead, today sees the release of German retail sales data and unemployment data, in addition to Eurozone manufacturing PMI data, the final reading for January.