Euro pound exchange rate enters calmer waters, retail data could shake GBP/EUR on Friday

Our latest report on the sterling notes the UK currency to have been consolidating after recent losses with the euro to pound rate actually easing back again. However, Friday brings with it the release of retail sales data which could induce GBP/EUR volatility.

The euro to pound sterling exchange rate is seen trading 0.15 pct lower on Friday morning. EUR/GBP is quoted at 0.8227. (GBP/EUR at 1.2155).

EUR/GBP entered calmer waters after the GBP correction earlier this week. Friday brings with it the potential for fresh volatility. Please follow today's live coverage for all the latest reactions, forecasts and views on today's GBP trade.

The focus turned from the UK data to the news flow from the EMU. EUR/GBP changed hands in the 0.8250 area at the start of trading in Europe.

"The EMU PMI’s were below consensus, with France showing an astonishing setback. The euro was sold. EUR/GBP joined this broader move, but the 0.82 big figure stayed out of reach. So, the euro loss of the euro was again very moderate," says a note on the matter issued by KBC Markets.

The CBI trends orders rebounded from ‐2 to 3, missing consensus expectations for a bigger pick‐up (6) after last month’s sharp decline.

However, the report had no lasting impact on EUR/GBP trading. Cable even reversed most of the intraday losses later in the session.

Are markets immune to poor US data?

The Philly Fed survey did very little damage to the U.S. dollar this morning with the greenback quietly consolidating against other major currencies.

"Based on the price action in the foreign exchange market this morning, FX traders are starting to become immune to weaker U.S. data.  Nearly every U.S. economic report released over the past month has been distorted by the brutal winter weather," says Kathy Lien at BK Asset Management.

For the time being BK Asset Management expect the 101.50-103 range in USD/JPY to remain intact and EUR/USD to hold below 1.3800.  

The increasingly narrow range in USD/JPY points to an imminent breakout but with no major U.S. economic reports scheduled for release on Friday, we can't see a breakout occurring within the next 24 hours.  

While USD/JPY is struggling to rally, if investors continue to price in or discount weaker U.S. data, the currency pair could crack above 103 on the first sign of significant strength. In the meantime FX traders should keep an eye on Treasuries and equities.  If yields continue to rise and stocks extend higher USD/JPY could hit its monthly high of 102.75.