The GBP EUR exchange rate was 0.10% higher on Wednesday as the pair hovers above recent key support. The Bank of England meets for its latest policy-setting even today and that will determine the price action for the rest of the week, and possibly further.
The GBP to EUR was trading at 1.1885 with key supports into 1.1800.
German exports tumble on Russia, euro retail sales also decline
Germany’s trade balance ‘crashed’ in March, according to Oliver Rakau of Oxford Economics:
“German trade balance crashed in March to below its pandemic low to levels otherwise last seen in the early-2000s. Adj. for soaring import prices the goods balance fell much less markedly in real terms, but (self-) sanctions & supply chain issues still left their mark in exports,” he said.
With exports down 3.3%, and imports up 3.4%, Germany’s trade surplus dropped to €3.2bn in March, down from €11.1bn in February and €14bn a year earlier in March 2021. Europe’s former powerhouse economy is slipping dangerously close to a deficit.
German exports to Russia have slumped to their lowest in almost two decades, as the Ukraine war hits the European economy. Exports to Russia were hit hard, dropping over 60% compared to February, due to sanctions imposed as a result of the Ukraine invasion, and “unsanctioned behaviour of market participants”, Destatis said.
There were further storm clouds for Europe with Eurostat reporting a drop in retail sales, March sales fell by 0.4% in a bigger decline than expected.
Many EU countries relaxed Covid-19 restrictions in March, which could have supported spending in the shops. However, households are now being hit by soaring energy prices and other costs instead.
The biggest monthly drop was for mail orders and internet purchases, which were down 4.3%, as people returned to shops rather than buying online. However, store sales were hit by rising inflation and confidence.
ING were also gloomy about Germany’s prospects, saying:
“New lockdowns in China and a continuation of, instead of easing, last year’s supply chain disruptions will leave significant marks on German industry. According to a recent Ifo survey, almost half of all German companies are dependent on imports from China. Also, the war in Ukraine is very likely to disrupt other supply chains for good.”
Eurozone supports phased ban on Russian oil imports
Europe is now nudging towards a full ban on Russian energy, with EU Commissioner, Ursula von der Leyen, proposing a total ban on Russian oil imports to the EU. The EU bureaucrat said Vladimir Putin had to pay a “high price for his brutal aggression” in Ukraine.
Member states in Brussels are now discussing a sixth package of sanctions, but in a speech on Wednesday the European Commission president said Russian oil flows had to halt.
Von der Leyen said Russian supply of crude oil would be banned within six months and refined products would be banned by the end of the year, while she acknowledged the demands from countries such as Slovakia and Hungary.