Pound V euro: GBP rate drops against EUR as UK retail sales worsen

THE pound has declined against the euro today following news that UK retail sales were worse than expected.

Pound in decline after British retail sales fell in December

The GBP/EUR exchange rate has fallen to within the region of €1.133, although against the US dollar the pound has hit the best exchange rate since after the EU Referendum in 2016.

In December, UK retail sales fell by more than expected for the month-on-month readings.

In a similarly disappointing situation, predictions for 3 per cent year-on-year growth rate were upset when sales growth slowed instead of accelerated.

The new figures represent the slowest pace of sales growth since 2013.

pounds and eurosGETTY

The pound has declined against the euro today

Looking in detail at the results, ONS Senior Statistician Rhian Murphy.

She said: “Retail sales continued to grow in the last three months of the year partly due to Black Friday deals boosting spending. 

“Consumers continue to move Christmas purchases earlier with higher spending in November and lower spending in December than seen in previous years. 

“However, the longer-term picture is one of slowing growth, with increased prices squeezing people’s spending.”

pounds and eurosGETTY

The pound euro exchange rate has fallen to within the region of €1.133

Retail sales continued to grow in the last three months of the year partly due to Black Friday deals boosting spending

Rhian Murphy, ONS Senior Statistician

Rounding off the assessments with a question for GBP traders to consider, Hargreaves Lansdown Senior Economist Ben Brettell said: “The big question now is whether this is the start of a worrying trend for the economy, or whether falling inflation and rising wages will come to the rescue.”

On the other side of the currency pairing, the euro to pound exchange rate has risen, with the euro also advancing against the US dollar and South African rand.

The euro has appreciated on the back of promising signs coming from German coalition talks, which are approaching a critical juncture.

Chancellor Angela Merkel, who failed to secure an outright majority in the late-2017 election, has been trying to forge a coalition between the CDU/CSU union and SPD Party.

Talks have reportedly gone well this week, although there is still a lot of uncertainty about whether SPD factions will support another union with their long-time rivals.

The Bank of England explains the exchange rate

Reiner Hoffman, Chairman of Germany’s largest union group, has voiced support for another ‘grand coalition’ between the parties.

Mr Hoffman said: “We have reviewed the results of the exploratory talks and there is much substance there for workers in Germany.”

The pound may struggle against the euro on Tuesday (23 January), when the Confederation of British Industry (CBI) data is published.

For the Q1 and January readings, forecasts are for falling levels of business optimism and industrial orders.

The euro, meanwhile, could move in response to Sunday’s SPD vote on continued coalition talks.

If the party’s opposition elements are in the majority and reject another union with Angela Merkel’s group, the euro could crash against the pound.

Rejection may mean that a weakened minority government takes charge, or that Germany faces another bruising federal election.

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