GBP/EUR: Pound Heads Higher As EU To Mull Over Brexit Extension
  • Pound (GBP) fell on Friday after weak retail sales
  • Pound rose last week
  • Euro (EUR) finds support from a hawkish Lagarde
  • Eurozone consumer confidence is expected to slip

The Pound Euro (GBP/EUR) exchange rate is falling after booking strong gains across last week. The pair rose 1.15% last week settling on Friday at €1.1414, after trading in a range between €1.1250 – €1.1467. At 05:45 UTC, GBP/EUR trades -0.15% at €1.1399.

The pound fell at the end of last week after data showed that UK retail sales unexpectedly dropped in December as consumers reined in their spending as inflation remain elevated, and household budgets were squeezed. Sales fell by 1% month on month, defying expectations of a 0.5% increase in sales. Retail sales in November were also downwardly revised -0.5% month on month.

On an annual basis, retail sales fell -5.8%, the largest December fall since records began in 1997 and the ninth straight fall in sales in annual terms. The data came after inflation data earlier last week showed that consumer price growth remained in double digits and after a solid labour market report. The pound fell on Friday but rose over 1% across last week.

This week, the economic calendar is quieter. There is no high-impacting UK economic data due to be released today. Looking ahead, PMI data on Tuesday will be in focus, which could shed light on how the service and manufacturing activity held up at the start of the year.

The euro fell last week despite hawkish commentary from several European Central Bank policymakers, including President Christine Lagarde. She insisted that inflation was still far too high and that interest rates need to rise further to bring inflation back to 2%.

Today attention will turn towards the release of Eurozone consumer sentiment data which is expected to show that consumer confidence slipped further in January to -22.5, down from -22.2 in December, which was a slight improvement in November. Deteriorating sentiment could pull the euro lower.