The last period has been poor for the pound, as the EUR to GBP rate heightened considerably. This followed the release of data from the UK’s Office for National Statistics. It indicated that retail sales in the UK were underwhelming for this last September. Understandably, this put pressure on the pound. Now it seems that the EUR to GBP rate has jumped up to its highest level in 5 months.
As it currently stands, an exchange of 1 EUR to GBP would be 0.874 this Friday.
The retail sales data for September showed a drop of 0.9%. Analysts were only expecting a decline of 0.1%, so such a sudden shift has understandably affected the sterling. Overall, over the last year, there was an overall loss of 1% in sales. This actually performed better than experts had been expecting, who foresaw major stagnation in the UK economy.
The cause of September’s drop is for a variety of reasons. However, the main one would be inflation. Households just cannot spend as much as they used to be able to. There is also the factor of higher lending costs. Due to the reduced spending, analysts expect the BoE to keep interest rates at their current level for November. The rates are already fairly high, at 5.25%, so it only makes sense for them to be cautious.
The other factor is Europe, of course. Markets are wondering if the ECB will take a shift on its current monetary policy. However, we cannot know how likely this would be. Inflation remains high in Europe, and there is the potential that growth will slow down or that stagflation may occur.
However, the ECB president appears to be confident. She stated that inflation is predictable, and wage growth is going strong. This may be why the euro is outperforming the pound right now, with the high euro to GBP exchange rate.
