[vc_row][vc_column][vc_column_text]A smaller-than-expected decline from the British Retail Consortium (BRC) like-for-like retail sales figure was not enough to keep the pound from edging lower ahead of the weekend.

Confirmation that Eurozone industrial production declined even before the impact of the Covid-19 outbreak helped to limit the appeal of the euro, meanwhile, while shifts in risk appetite drove both the US and Australian dollars.

While UK retail sales saw a smaller deterioration than forecast in March this offered little in the way of support to GBP exchange rates.

With UK consumers reining in their spending in response to the Covid-19 crisis worries over the outlook of the economy picked up, given that strong retail sales have previously supported growth.

The government’s apparent lack of exit plan from the current lockdown also spooked investors, with the prospect of the economy returning to normal seeming increasingly distant.

Support for the pound could weaken on the back of Tuesday’s average weekly earnings figures, as softer wage growth would increase the pressure faced by UK households.

However, a greater source of GBP exchange rate volatility appears in store with the release of April’s provisional manufacturing and services PMIs.

Forecasts suggest a deeper slide into contraction territory for both the manufacturing and service sectors, raising the risk of a sharp economic slowdown.

Unless the service sector can avoid a significant loss of momentum here the pound looks set to trend lower across the board once again.

Euro support limited thanks to Eurozone industrial slowdown

As Eurozone industrial production weakened on both the month and the year in February this put a fresh dampener on the euro.

Evidence that the manufacturing sector was already in a state of decline before Eurozone governments began imposing economic lockdowns left investors with little cause for confidence.

The lingering issue of the Eurozone shared debt proposal also limited the appeal of the single currency, with unity still looking more strained than markets would like.

If Eurozone leaders fail to reach a satisfactory agreement at Thursday’s upcoming summit a sense of political anxiety could easily drag on the euro once again.

With the German GfK consumer confidence index looking set to slip into negative territory, meanwhile, EUR exchange rates may struggle to find support.

The release of April’s flash Eurozone manufacturing and services PMIs may weigh heavily on the euro, particularly if the German manufacturing sector sinks deeper into a state of decline.

Unless the currency union can demonstrate signs of resilience at the start of the second quarter EUR exchange rates look set to soften.

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* Information courtesy of Currencies Direct, Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct
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