Thursday, 21 May 2015

GBP/EUR breaks €1.40 on strong UK Retail Sales

Sterling/Euro rates have today pushed through the €1.40 barrier again today, following stronger than expected UK Retail Sales data. This is the 3rd time in the last few months the pair has broken through the key 1.40 level: 


The much better than expected Retail Sales reflect a growing confidence in the UK economy, and as such Sterling has risen against other currencies. Also helping the Pound this week were the minutes to the recent Bank of England decision to hold interest rates. While all 9 members voted to keep rates on hold, it seems for 2 of them it was a finely balanced decision. This means that despite inflation turning negative this week, a 2016 interest rate hike could be on the cards, helping boost the Pound. 

Will Pound/Euro rates remain above €1.40? 


It’s impossible to predict of course, but looking at past performance it’s clear this level has been reached several times in the last few months before dropping back away. The only thing keeping the rate high is uncertainty over Greece’s next debt repayment. If they make progress in this respect then expect the rate to drop back away. If it looks like they will have difficulty meeting their commitments, the rate may be sustained above €1.40. 

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