However, no-deal Brexit fears were tempered by yesterday’s victory of the Liberal Democrats in the Brecon and Radnorshire by-election, which brought the Tory Government’s majority down to 1. Jo Swinson, the leader of the Liberal Democrats, said: “Boris Johnson’s shrinking majority makes it clear that he has no mandate to crash us out of the EU.” Meanwhile, the euro benefits from its negative correlation with the US dollar today, with President Donald Trump once again escalating US-China trade tensions, imposing a fresh 10 percent tariff on $300 billion of Chinese goods. As a result, traders have fled to the euro as the US dollar safe-haven suffers from rising global trade fears.
However, the euro could fall against the pound today if Donald Trump imposes tariffs on EU’s goods in his US-EU trade announcement later this afternoon.
Today saw the publication of the Eurozone’s year-on-year retail sales for June, which rose above forecasts from 1.0 percent to 2.6 percent.
Month-on-month figures also improved, rising from -0.6 percent to 1.1 percent, and providing further uplift for the euro today.
Meanwhile, the pound fell following today’s publication of the UK Markit Construction PMI for July, which dropped below consensus and remained in contraction territory at 45.3.
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, said: “The sector felt the pressure of challenging economic conditions and the impact of another disastrous drop in demand growth, as purchasing activity petered out and Brexit nibbled away at confidence and decision-making.”
The GBP/EUR exchange rate is likely to remain downbeat into next week as ongoing tensions between the UK and the EU over the Irish backstop are likely to continue their drag on market confidence in Sterling.