GBP/EUR: Gloomy Brexit News Weigh On Pound vs. Euro
  • Pound (GBP) rises despite weak sales data
  • Concerns over economic growth rise
  • Euro (EUR) eases despite improving ZEW German economic sentiment
  • German inflation data is due

The Pound Euro (GBP/EUR) exchange rate is holding steady on Wednesday after gains in the previous session. The pair rose 0.2% yesterday, settling at €1.1701, after trading in a range between €1.1655 – €1.1718. At 05:45 UTC, GBP/EUR trades -0.01% at €1.1700.

The Pound pushed higher in the previous session despite data raising concerns over the cost of living crisis in the UK. Data from the British Retail Consortium showed that retail sales fell -0.3% annually in March as the squeeze on household incomes caused consumers to slash spending. Sales fell for the first time since January last year in the pandemic.

The data comes as inflation in the UK sits at a 30-year high, and after the Bank of England has raised interest rates at the past four monetary policy meetings in an attempt to rein inflation back to the central bank’s target level.

Today there is no high impacting UK economic data, so the sentiment is likely to move the pound.

The euro came under pressure yesterday despite German economic morale improving in May. The ZEW German economic sentiment index improved in May to -34.5, up from -41 in April. Analysts had expected economic confidence to fall further to -42.5.

In other words, the experts surveyed asses that the financial situation will deteriorate but with less intensity following the initial fallout and shock from the Russian war.

Looking ahead, the focus is expected to stay on Germany today with the release of German consumer price inflation data. Expectations are for inflation to confirm the preliminary reading of 7.4% year on year, a record high, and 0.8% on a monthly basis.

The ECB is still tapering bond purchases, but there appears to be growing momentum for an interest rate hike in July. Hot German inflation could fuel bets of a more hawkish ECB and lift the euro.