The GBPEUR exchange rate is flat in early trading on Friday, despite a weaker than expected retail saels figures. Due to the recent lockdowns, traders were not expecting an exciting number and attention will turn again to Boris Johnson’s “roadmap” for reopening the economy on Monday.
GBPEUR is trading at 1.1550 after another strong week for the British pound.
UK Retail Sales Disappoint in January
UK retail sales slumped -8.2% for the month of January versus expectations of -2.5%. Core retail sales, less fuel sales, was worse at -8.8% versus -2.6% expected.
The ONS said of the data:
“Retail sales volumes were 5.5% lower than before the pandemic in February 2020 indicating that the impact of restrictions on the retail sector was not as large as that seen in April 2020 during the first full month of retail restrictions when sales fell by 22.2%”.
Public sector net borrowing in January was better than expected with a reading of -£8.75bn against forecasts of -£24.5bn.
The market is now awaiting PMI figures from Germany, the Eurozone and the UK later this morning. Those figures will determine the trend into the weekend and Monday will be dominated by the plans for reopening the UK economy.
Traders will be looking for a strong reading in the UK’s services PMI, while Germany’s outlook is more swayed by the manufacturing PMI.
React Sees a Strong Decline in Virus Levels
Imperial College’s React study has found “strong decline” coronavirus infections in England since January. The numbers are similar to those seen in September 2020 and the country should start to see levels drop consistently as vaccines continue to rollout.
Boris Johnson will address the nation on Monday to announce his roadmap for reopening, pledging a “data not dates” approach to ending the lockdowns. The usual chaos reigns as Northern Ireland have agreed to extend lockdown restrictions to 1st April, although children will go back to school on 8th March. Scotland’s First Minister Nicola Sturgeon will make a separate announcement next week on whether pupils will go back, while the Welsh government is due to share its plans Friday.
The GBP to EUR exchange rate outlook will be largely driven by Johnson’s strategy to exit the lockdown. The country has vaccinated more than 25% of its population and those should have a second dose of the shot sometime in March.
With the Chancellor releasing a new budget on March 3rd, the country has a great opportunity to spur a second quarter rebound as predicted by the Bank of England in its policy update last week.
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