GBPEUR Edges Higher Despite Stronger Euro Data

GBPEUR Stuck in Familiar Territory Near 1.17

The GBPEUR exchange rate was higher on Monday after finally crawling above the 1.15 level with a 30 pip gain. German retail sales came in stronger than forecast but this was countered by final readings for PMI which were a little softer.

The GBP v EUR is awaiting the latest interest rate announcement and monetary policy from the Bank of England on Thursday.

German retail strong but euro sees no gain

German retail sales showed their largest yearly increase in March since the pandemic began as consumers finally saw lockdown restrictions removed.

The Federal Statistics Office posted a reading of 11.0%, which was a contrast to Reuters forecasts for a loss of -0.2%. February’s numbers were lower by 6.6% but were upwardly revised. Germany saw sales of textiles, clothing, and shoes jump by 27.7% when compared to a year ago. The numbers are impressive but not so much when you consider that consumers have been locked down for much of the winter and will be in need of items that they maybe couldn’t find online. Some prefer the physical experience when it comes to clothes and the numbers will revert to the mean on reopening.

However, online retailers got their usual lockdown boost with a near 43% gain compared with the previous year. German stores were allowed to open for appointment shopping in a move named “click and meet”. The GBP to EUR was not affected by the figures as traders will see them as being transitory, while UK consumers are allowed more freedom.

Eurozone factory activity at record highs

European factory activity saw record gains in April, with the sector boosted by strong demand, which also helped to boost hiring. Supply constraints were a drag, but this is happening globally, as seen with a slowing in Chinese activity.

The lockdown has seen factories largely unaffected, and this has helped to support the underlying economy as services sectors have struggled. The IHS Markit Manufacturing PMI index rose to 62.9 in April from 62.5 in March, which was lower than the estimated 63.3, but was still the highest reading since the gauge was first used in 1997.

French manufacturing growth was a little lower in March, but Italian activity grew at its fastest pace on record. German factory orders were also supported by strong demand from the USA and China.

The pound v euro now awaits the same PMI figures from the UK economy, while Thursday will be the Bank of England’s monetary policy and interest rate update. Markets are keen for an update on the bank’s expectations for winding down their bond purchase program, but it is unlikely that the BoE will stray from other central bank statements, where the ECB and Federal Reserve have stressed a need for patience.

GBPEUR trades at 1.153o as it tries to hold the uptrend that saw highs of 1.18 in early-April before traders got cold feet with the cautious UK reopening roadmap.