- Pound (GBP) falls for a third straight day
- Retail sales jump 3.4% MoM in January
- Euro (EUR) rises after hawkish comments from ECB’s Schnabel
- EC downwardly revised growth forecasts
The Pound Euro (GBP/EUR) exchange rate is falling for a third straight day. The pair fell -0.15% in the previous session, settling on Thursday at €1.1694 and trading in a range between €1.1664 – €1.1718. At 11:00 UTC, GBP/EUR trades -0.05% at €1.1688. The pair is set to fall -0.16%.
The pound is fooling despite UK retail sales rising an impressive 3.4% month on month, rebounding after a 3.3% decline in December. This was well ahead of the 1.5% increase that analysts had been expecting.
The upbeat news comes just a day after the UK data confirmed the economy tipped into recession in the final three months of 2023. However, upbeat retail sales could suggest that the recession in the UK could be shallow.
Earlier in the week, inflation data was unchanged, and the labor market proved to be resilient. These macroeconomic data points will likely see the Bank of England official. Dragging their feet when it comes to cutting interest rates.
Bank of England rate setter Megan Greene said that she won’t vote to cut interest rates until she sees more evidence that inflation is returning to the central bank’s target 2% level.
The euro is rising as investors digest mixed signals. ECB policymaker Isabel Schnabel’s more hawkish comments have offered a boost to the common currency. The German voting member of the ECB warned about cutting interest rates too soon, suggesting that Europe’s sluggish productivity growth may slow the full inflation to the ECB’s 2% target.
Meanwhile, the European Commission had downwardly revised its growth forecasts for 2024 to 0.8%, down from 1.2% previously expected. The Commission sees a gradual resurgence in the latter half of this year as inflationary pressures are expected to cool whilst an increase in real wages and robust labour market could also stimulate consumer spending.
The EC also expects growth of 1.7% in 2025, which was unchanged from the autumn forecast.
Despite some encouraging signs, the EC remains concerned and vigilant to looming economic risks, which include the phasing out of energy support schemes and sustained geopolitical friction that particularly in the Middle East affecting Red Sea trade routes.
