- Pound (GBP) is supported as Chancellor Reeves supports growth
- BRC retail sales fall 0.5%
- Euro (EUR) steadies on hung parliament result
- Moody’s warned over debt levels
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose 0.8% in the previous session, settling on Monday at €1.1827 and trading in a range between €1.1818 and €1.1856. At 13:00 UTC, GBP/EUR trades +0.08% at €1.1836.
The pound is edging higher as investors continue to digest the results of last week’s election, which brought Labour into power.
The pound has remained supported as the new Chancellor, Rachel Reeves, said she looks to take down growth barriers, although she also warned that there are no quick fixes.
Meanwhile, Bank of England policymakers are out of the blackout period surrounding the election, and BoE policymaker Jonathan Haskel adopted a cautious stance about cutting interest rates in August. Haskel warned that service sector inflation and price pressures in the labour market remained too high, and it’s unclear when they could fade.
The market is currently pricing in a 60% probability that the Bank of England will cut rates in August.
On the data front, the British Retail Consortium revealed weaker retail sales in June as shoppers were put off by cold June weather. Retail sales fell by 0.5% on a like-for-like basis after rising 0.4% in May.
The euro is falling as investors continue to weigh up and assess the political developments in France after the surprise election results.
While the left-wing alliance won, they failed again in the majority, meaning the election have resulted in a hung parliament.
While this could limit the left’s spending plans, it also means that the government may struggle to get anything done.
As France grapples with expectations of political gridlock and policy paralysis, Moody’s rating agency warned about the French debt outlook, said they will be keeping an eye on debt affordability.
