- Pound (GBP) rises despite weak sales data
- Concerns over economic growth rise
- Euro (EUR) eases after rising despite falling investor sentiment
- German ZEW economic sentiment data is due
The Pound Euro (GBP/EUR) exchange rate is rising on Tuesday after losses in the previous session. The pair fell -0.2% yesterday settling at €1.1679 after trading in a range between €1.1667 – €1.1744. At 05:45 UTC, GBP/EUR trades +0.11% at €1.1691.
The Pound fell in the previous session owing to stagflation fears amid a risk-off session in the markets. Inflation is at a 30-year high of 7% but is expected to keep rising, with former Bank of England economist Andy Haldane warned that inflation will likely push over 10%. Surging inflation could choke economic growth, and the BoE slashed its growth forecasts last week and now expects a 1% contraction in the final quarter of 2022 and the economy to remain broadly flat in 2023 and 2024.
UK GDP is due later this week and could show that the UK economy is stalling.
The weaker outlook has meant that investors have reined in expectations of BoE rate hikes this year with a slow pace now forecast to help support the UK economy.
Today the pound is edging higher despite data today showing that shoppers are cutting spending as they feel the hit from surging inflation. The British Retail Consortium reported total spending was 0.3% lower than a year earlier compared to 3.1% growth in March.
The euro showed resilience yesterday and pushed higher across the board, even against the might USD. Despite investor sentiment falling for a third straight month, the euro managed to gain ground, hitting its lowest level in almost two years amid the fallout from the Russian war.
Today the euro is edging lower as attention turns to the ZEW economic sentiment data. Analysts expect economic sentiment to deteriorate further in May to -42.5, after falling to -41 in April.
A speech from ECB’s De Guindos will also be listened to carefully amid growing expectations that the ECB could hike rates as soon as July.