- Pound (GBP) is rising after three days of losses
- BRC retail sales rise 3.1% YoY in August
- Euro (EUR) falls after the French government collapses
- 10-year French bond yield climbs
The Pound-Euro (GBP/EUR) exchange rate is rising, snapping a three-day losing run. The pair fell 0.03% in the previous session, settling on Monday at €1.1516. It traded between €1.1513 and €1.1546. At 16:30 UTC, GBP/EUR trades +0.23% at €1.1543.
The pound is rising after data shows that UK consumers spent more in August. According to data from the British Retail Consortium, UK shoppers spent 3.1% more in annual terms in August compared to the same time last year, up from a 2.5% increase in July. However, the BRC also noted that some of the increase reflected higher food prices too.
Food spending rose by 4.7% in August compared to a 1.8% increase for other goods. The data comes after UK inflation rose to 3.8% year on year in July and is expected to continue to rise to 4%.
Amid sticky inflation, the Bank of England is unlikely to be able to cut rates soon, which is keeping the pound supported. However, gains could be limited owing to nerves surrounding the Chancellor’s budget in November.
The euro is trading lower after the French government collapsed with the defeat of the Prime Minister at a confidence vote in the National Assembly.
The defeat of 364 votes to 194 means that they will tomorrow present his resignation to President Macron, who must now decide how to replace him.
This means France is on track to have its 5th Prime Minister in less than two years, a poor record that underscores the challenges marking President Macron’s second term.
Whilst the French Stock market is actually rising for a second straight day, government bond yields are climbing higher. The French 10-year government bond yield is rising, not as high as the level seen last week, but it has risen above those of riskier borrowers on the eurozone’s periphery, such as Greece and Italy.
The eurozone economic calendar is quiet. Attention will be on the ECB rate decision on Thursday, where the central bank is expected to leave rates unchanged.