The pound traded with a negative bias on Tuesday. The pound euro exchange rate closed the session 0.25% lower at €1.1819 its third straight session of losses. Pound investors remain jittery ahead of the Bank of England monetary policy announcement on Thursday and Brexit on Friday.
Pound
Data from the Confederation of British Industry (CBI) revealed that retail sales flatlined in December and early January as UK retailers experienced a tough start to the year. Retailers have seen sales volumes stagnate for three consecutive months. Sales were particularly poor given the time of year. It is still too early to see the impact of a more stable political landscape following the general election. Analysts believe that the outright Conservative win could boost consumer confidence, however this isn’t showing up in the data so far.
Stagnating retail sales are adding to the mixed picture of the UK economy ahead of the BoE monetary policy meeting this week. Whilst retail sales have been disappointing, PMI data and labour market data released this month were more encouraging. As a result, investors are pricing in a 50% probability of a rate cut.
In addition to the BoE rate decision, Brexit is back in focus as the UK leaves the EU on Friday. Attention will move towards the complex negotiations between the EU and UK as the countdown begins to the end of the transition period. If no deal is agreed the UK will have a hard Brexit. Hard Brexit fears could keep pressure on the pound.
Euro
Demand for the euro was muted in the previous session as investors awaited the next catalyst. The euro has held up relatively well versus the pound in recent sessions, despite a more dovish than expected sounding European Central Bank and despite a surprise weakening in German IFO business confidence.
Today investors will look towards the release of GFK German consumer confidence data. Analysts are expecting confidence to remain steady at 9.6. So far, despite the ongoing slump in the German manufacturing sector, the consumer sector has remained resilient thanks to a solid labour market. A confident consumer tends to spend more, which is good news or the economy. Therefore, a strong reading today could boost the euro.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.13990 EUR Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound . Or, if you were looking at it the other way around: 1 EUR = 0.87271 GBP In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro. |
