- Pound (GBP) falls sharply across the week
- UK retail sales fall -0.3% MoM
- Euro (EUR) is rising after inflation data
- ECB is expected to cut rates again this month
The Pound Euro (GBP/EUR) exchange rate fell for a second straight day on Friday The pair fell 0.10% in the previous session, settling on Thursday at €1.1883. It traded in a range between €1.1849 and €1.1903. GBP/EUR closed -0.35% lower on Friday €1.1841.
The pound fell again on Friday after more weak data raised concerns over the outlook for the UK economy.
UK retail sales slumped 0.3% month on month in December, down from a 0.1% rise in November and below forecasts of a 0.4% increase. Soft sales over the Christmas period highlighted the fragile mood among consumers.
However, it’s not just consumers who are feeling the pressure. Business confidence slumped, and hiring plans have fallen sharply since Labour’s budget in October.
The weak data comes after UK GDP figures earlier in the week showed the economy grew by a softer than-forecast 0.1%.
Weaker growth and a gloomy outlook contrast with the latest growth forecast from the International Monetary Fund, which upwardly revised growth forecasts for the UK to 1.6% from 1.5% in its October projections. This will be some welcome good news for Chancellor Rachel Reeves after stagflation fears sent government borrowing costs sharply higher at the start of the week.
The euro gained against the weaker pound but held steady against the US dollar. Inflation data for the eurozone region confirmed that consumer prices held at 2.4% year on year in December, in line with November and as expected.
The data will keep the ECB on track for rate cuts this year. The next 25 basis point reduction is forecast for the end of this month.
Looking ahead to next week, the focus will be on Trump’s inauguration speech for any clues about possible trade tariffs on the region and how aggressively they may be implemented.