Pound-Euro could push higher if weaker German trade and industrial data reinforce concerns over the Eurozone outlook, although Sterling lacks a strong domestic catalyst.
The Pound to Euro (GBP/EUR) exchange rate edged higher on Thursday as an unexpected contraction in Eurozone retail sales weighed on the single currency.
At the time of writing, GBP/EUR was trading around €1.1665, slightly higher on the day.
DAILY RECAP:
The Euro (EUR) came under pressure after Eurozone retail sales unexpectedly contracted, reinforcing concerns that consumer demand across the bloc remains fragile despite signs of resilience elsewhere in the economy.
Data from Eurostat showed retail sales contracted by 0.3% in June, following 0.4% growth in May and against forecasts for a 0.1% increase.
The weaker consumer backdrop fuelled concerns that domestic demand could remain a drag on Eurozone growth and limit the European Central Bank’s (ECB) appetite to tighten monetary policy in the coming months.
Helping to limit the Euro’s losses, however, was Germany’s latest factory orders report, which showed new industrial orders rose by a stronger-than-expected 3.1% in June.
Meanwhile, the Pound (GBP) struggled to establish momentum, trading within a narrow range against most of its major peers.
An empty UK economic calendar left investors with little fresh data to digest, while stable conditions across British debt markets further deprived Sterling of direction.
Broader global market dynamics also provided limited impetus as investors adopted a cautious stance ahead of Friday’s influential US non-farm payrolls report, keeping many major currency pairs confined to narrow ranges.
Near-Term GBP/EUR Forecast: Narrowing German Trade Surplus to Drag on the Euro?
Looking ahead, the Pound to Euro exchange rate could strengthen following the publication of Germany’s latest trade figures.
Economists expect the country’s trade surplus to have narrowed in June, driven partly by weaker export growth.
Germany’s accompanying industrial production figures could add to pressure on the single currency if they confirm that output growth slowed sharply at the end of the second quarter.
Meanwhile, with no high-impact UK releases scheduled, Sterling will remain largely driven by broader market sentiment.
A continued decline in global energy prices could provide some support for the Pound if it helps pull UK gilt yields further away from their recent highs.
Our currency coverage draws on live market data, official economic releases and published bank research.
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