- Pound (GBP) is falling for a third day
- UK GDP was 0.3% QoQ in Q2 but consumption was flat
- Euro (EUR) rises despite falling German retail sales
- German CPI data is due later
The Pound-Euro (GBP/EUR) exchange rate is falling for a third straight day. The pair fell -0.01% in the previous session, settling on Monday at €1.1453. It traded between €1.1431 and €1.1477. At 09:00 UTC, GBP/EUR trades -0.10% at €1.1442.
The pound is falling again on Tuesday despite the UK economy growing faster than initially thought in the first six months of the year.
According to data from the Office for National Statistics, there was a small upward revision to real GDP. The data showed that the quarterly rate of GDP growth in the second quarter of the year was unrevised at 0.3% quarter on quarter. This was down from 0.7% growth in the first quarter of the year. However, the annual growth rate was upwardly revised from 1.2% to 1.4%.
Delving deeper into the figures, the data still suggests a weaker picture, with Q2 growth heavily reliant on government spending. Consumption across the quarter was relatively flat, while business investment fell by 1.1%.
Meanwhile, the pound could also come under pressure if there are signs of more expansionary fiscal policy at the Labour Party’s conference this week.
The markets remain concerned about the UK’s fiscal outlook ahead of the Chancellor’s budget in November.
The euro is pushing higher as investors brush off weaker-than-expected German retail sales and look ahead to German inflation figures later today.
The latest German retail sales show that sales unexpectedly fell in August, decreasing by -0.2% in real terms compared to the previous month. Expectations had been for a 0.6% increase. It follows a fall of 0.5% MoM of sales in July.
The data shows that the buying mood cooled considerably over the summer amid economic worries.
Attention will now turn to German inflation data, which is expected to show that the German CPI rose to 2.3% year-over-year in September, up from 2.2% in August.
This is still relatively close to the ECB’s target 2% level. ECB president Christine Lagarde also speaks today. The ECB is not expected to move rates again this year, and the markets are only pricing in a 35% probability of a 25-basis-point cut between now and June next year.
