- Pound (GBP) is falling and falls across the week
- UK retail sales fell -2.7% MoM
- Euro (EUR) gains despite dovish ECB message
- EZ PMI data and a speech by Lagarde are in focus next week
The Pound-Euro (GBP/EUR) exchange rate is falling, giving back yesterday’s gains. The pair rose 0.16% in the previous session, settling on Thursday at €1.1708. It traded between €1.1680 and €1.1729. At 17:30, GBP/EUR trades -0.27% at €1.1686.
The pound is falling after data showed that UK retail sales recorded the biggest monthly drop since 2023. Figures from the Office of National Statistics showed that retail sales fell by 2.7% month on month in May, a much sharper decline than expectations of 0.5% and down from 1.3% growth in the previous month.
Consumers spent less on alcohol and tobacco, while footfall at clothing stores and DIY demand were also weaker. The dismal figures came after a bumper month in April, which saw strong spending boosted by sunny weather.
The data supports the view and adds to evidence that the strong economic growth seen in the first quarter is over, and in the second quarter will likely see more tepid growth.
The UK economy grew by 0.7% in the first three months of 2025; however, GDP data issued in April showed that the economy contracted.
Looking ahead to next week, attention will be on Monday’s PMI figures and Bank of England governor Andrew Bailey’s speech.
The euro is gaining against the pound, although the upside could be limited following dovish comments from ECB policymaker Villeroy de Galhau. He said that if the ECB decides to move on interest rates in the next six months, it would most likely be a cut.
His comments come as inflation in the region falls below the ECB’s target 2% level and as the ECB signaled to a pause in policy easing this month.
Looking ahead to next week, attention will be on PMI data, which will provide further clarity on how business activity is holding up in the region.
ECB policymaker Christine Lagarde is also due to speak next week and could provide further insight on the outlook for ECB rate cut.
