Eurozone retail sales decline more than expected to weaken the struggling Euro

Claire Hogarth06/Nov/2014Currency Updates

GBP

The Pound very briefly touched a twelve month low on the Dollar on Tuesday morning, falling 0.4% on the back of poor services data. The UK currency did, however, manage to recover, finishing 0.2% up at the end of London trading.

Pressure to raise interest rates was eased in the UK on Wednesday after services sector growth slowed in October to its lowest level since June 2013. Markit’s services PMI came in below expectations at 56.2, well down from the 58.5 that economists had anticipated. In a statement the company added that the data had “thrown a cloud of uncertainty over the [economic] outlook”. The outcome will be another reason for caution on the part of the Bank of England, which concludes its two day MPC meeting today.

Today is a significant day in the economic calendar with a number of key announcements and releases. At midday in the UK, the Bank of England will be releasing its interest rate decision. This is followed by the GDP estimate at 3pm from the National Institute of Economic and Social Research.

EUR

The single currency returned to Monday’s level against sterling after falling by 0.45% during London trading yesterday. This was after data showed further indications of the current economic slowdown that has been plaguing the Eurozone economy over the past few months. The Euro also lost ground against the greenback, depreciating by 0.25% on the US currency over the course of the day.

More signs of fragility in the Eurozone. Eurostat announced that retail sales fell by 1.3% month on month in September, matching its greatest monthly decline since June 2012. This caused the annualised figure to come in well below the 1.9% expected at 0.6%. The services PMI for the area also registered a surprise decline, falling in October to 52.3, down slightly on September’s 52.4.

All eyes in the Eurozone will be on the ECB today with the central bank’s monetary policy statement at 1:30pm GMT.

USD

The Dollar showed broad strength during London trading increasing by 0.1% against its major peers. Business conditions in the non-manufacturing sector of the US economy declined in October according to the Institute of Supply Management. The ISM index fell more than predicted to 57.1, down from 58.6 in September. Other data yielded mixed readings on Wednesday. The services PMI dropped to its lowest level since May, at 57.1. On the positive side, the ADP survey of private employment put increased in October by 230,00, its greatest jump since July.

A number of second-tier releases in the US today with focus firmly shifted to the UK and the Eurozone. Initial and continuing jobless claims are announced in early afternoon followed by two speeches by Fed members.

Rest of the world

The Russian Ruble fell further on the dollar overnight on Tuesday and into Wednesday reaching a record low as the Russian central bank moved closer to allowing the currency to float freely. The currency lost as much as 3% of its value overnight and has now plummeted by 23% since July and almost 50% since the summer of 2008.

The recent slump in oil price has taken its toll on the Nigerian economy, with the Naira heading for a record low after falling by 0.3% in its tenth consecutive day of losses.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.