- Pound (GBP) rose after stronger retail sales
- UK banks to wait 12 months to repossess houses
- Euro (EUR) looks to ECB forum & Christine Lagarde’s speech
- German IFO business climate data due
The Pound Euro (GBP/EUR) exchange rate is rising for a fourth straight day but fell across last week. The pair fell 0.39% in the previous week, settling on Friday at €1.1669 and trading in a range between €1.1579 – €1.1741. At 07:35 UTC, GBP/EUR trades +0.04% at €1.1674.
The pound closed higher on Friday after UK retail sales were stronger than expected. Sales rose 0.3%, defying expectations of a -0.2% decline and after rising 0.5% in March. The data suggests that the UK consumer is holding up better than expected despite rising interest rates and high inflation.
However, sales could start to struggle from here after the BoE raised interest rates by a larger-than-expected 50 basis points to 5%. The market is pricing in a peak rate of 6.25%, a level which would tip the UK economy into recession.
This week is set to be a quieter week for the pound as far as economic data is concerned. The pound could find some support from an announcement from Treasury Secretary Jeremy Hunt, who said that banks have agreed to not to repossess houses for one year, should homeowners struggle to repay their mortgage, a move which could keep inflation elevated and therefore the need to keep interest rates higher for longer.
The euro rose across the previous week, despite a lack of fresh fundamental drivers. This week is set to be a busier week for the euro, with the ECB’s central bank forum keeping central bank action in focus. ECB President Christine Lagarde is due to speak. Her comments come as a rate hike in July is expected, but beyond that, ECB policymakers appear more divided.
On the data front, German IFO economic sentiment data will be in focus. The business climate is set to decline further to 90.7 in June, down from 91.7 in July. The data comes amid growing expectations that the eurozone’s largest economy will tip into recession. Weak economic sentiment could fuel recession fears.