The EURGBP currency pair continues its downward trajectory for the second straight day, trading near 0.8330 on Friday, as the pound sterling strengthens following the release of the UK Q4 gross domestic product and retail sales data.
UK GDP grew by 0.1% quarter-on-quarter in Q4, in line with expectations. On an annual basis, GDP expanded by 1.5%, surpassing the projected 1.4% increase.
Moreover, UK retail sales surged 1.0% month-on-month in February, defying forecasts of a 0.3% decline, though slowing from January’s downwardly revised 1.4% gain. Year-on-year, retail sales climbed 2.2%, exceeding expectations of a 0.5% rise and accelerating from a revised 0.6% increase.
Core retail sales, excluding auto fuel sales, also rose 1% MoM, outperforming the forecasted -0.5% decline, but lower than the previous 1.6% growth. On an annual basis, core retail sales advanced 2.2%, up from a revised 0.8%, both figures beating market projections.
On Thursday, Chancellor of the Exchequer Rachel Reeves stated in an interview with Bloomberg TV that the UK would not impose retaliatory tariffs on the US, emphasising the need to avoid escalating trade tensions. She expressed a preference for reducing tariffs, arguing that trade frictions could hinder economic growth.
Meanwhile, the EURGBP cross faces an additional downside as the Euro weakens amid escalating trade tensions between the US and the Eurozone.
Concerns over a potential trade war have intensified as the EU prepares retaliatory tariffs in response to the 25% auto tariffs imposed by US President Donald Trump, set to take effect on April 2.
Germany, which exports 13% of its total motor shipments to the US, is expected to be particularly affected, weighing on the euro’s outlook. Trump recently signed a proclamation enforcing the tariffs and warned of stricter measures against the EU and Canada should they retaliate.
In economic data, Germany’s GfK consumer confidence survey for April came in at -24.5, worse than expectations of -23.0, but marginally improving from the previous -24.6.
Investors will be watching Eurozone business climate and consumer confidence data for March for further market direction.
(Source: OANDA)