GBP/EUR: Gloomy Brexit News Weigh On Pound vs. Euro
  • Pound (GBP) fell yesterday after retail sales slipped
  • No data is due today
  • Euro (EUR) looks to ECB central banking forum
  • German IFO business climate fell by more than forecast

The Pound Euro (GBP/EUR) exchange rate is rising after losses in the previous session. The pair fell 0.15% in the previous session, settling on Monday at €1.1654 and trading in a range between €1.1633 – €1.1707. At 07:35 UTC, GBP/EUR trades +0.04% at €1.1658.

The pound fell in the previous session after British retail sales fell again in June, according to the Confederation of British Industries monthly index. Sales fell to -9 from -10 in May as households remain squeezed by the rising cost of living crisis amid high inflation and rising interest rates.

The data comes after the Bank of England raised interest rates by 50 basis points last week to 5%, surprising the market, which had expected a 25 basis point hike. While the market is pricing in a peak interest rate level of 6%, economists believe that the Bank of England will raise interest rates to a peak of 5.5%.

There is no high-impacting UK economic data due to be released today. Investors will look ahead to a speech by Andrew Bailey on Wednesday when he panels a discussion at the ECB central bankers forum in Sinatra, Portugal.

The euro advanced yesterday despite German business morale falling by more than expected. The Ifo business climate index declined to 88.4 in June, below the 90.7 that was expected and down from 91.7 in May.

Deteriorating business morale suggests that Europe’s largest economy could struggle to shake off the recession. Germany may potentially face a longer recession as domestic demand and expectations for exporters have weakened.

The ECB central banking forum kicked off yesterday in Sinatra, where ECB president Christine Lagarde spoke. She is due to speak again today, along with several other ECB policymakers, including Fabio Panetta Isabel Schnabel and Frank Elderson. Investors will be watching closely for cues over the future path of monetary policy.