Pound euro exchange rate down 0.6% as UK retail sales prove to be a game-changer; GBP/EUR breaks below 1.19 level

The British Pound has slumped against the Euro following the release of poor retail figures at 09:30.

• The pound to euro exchange rate is 0.64 pct lower on a daily basis; GBP/EUR is at 1.1865.
• The euro to pound exchange rate is at 0.8428.

[Keep in Mind: The above quotes are taken from the wholesale markets, your bank will subtract their own spread when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.]

Sterling sold off following retail sales stats

Big falls have been seen for the pound euro exchange rate following the release of this morning's retail sales:

It was shown that Retail Sales (YoY) (Aug) came in well below expectations at 2.1%. Analysts had forecast 3.3%.

Retail Sales ex-Fuel (YoY) (Aug) came in at 2.3%, well below the expected 3.1%.

Retail Sales (MoM) (Aug) actually declined by 0.9% against expectations for growth of 0.4%.

"Get ready for a tightening of purse strings in the UK. People have spent money in the summer and have commenced saving for Xmas," says a flash note from currency brokerage WorldFirst.

Bank of England holding out for improvements

The British pound had been firm against the Euro over the course of the past 24 hours in a continuation of the late summer theme of GBP/EUR strength.

Yesterday saw the release of the Bank of England (BoE) minutes from this month’s meetings and as expected it didn't throw up any surprises.

A 9-0 vote on keeping rates unchanged was the outcome and no change in the QE policy as expected.

"It seems new BoE governor Mark Carney is quite content on showing his hand and this is likely to mean we are unlikely to see any shocks in the coming months and if there are going to be any changes to policy he is almost certainly going to drop hints before making them," says Graham Harborne at Currency Index.

Harborne notes that we did see the pound rally as it seems that both investors and the markets like this ‘open book’ attitude of Mr Carney.

The rest of the trading day was fairly subdued with little in the way of data from Europe or the States.

The fireworks all happened early evening when the FED decision, no change, was announced but more importantly the dovish tone of the press conference held by Ben Bernanke.

"After a number of months of Bernanke dangling the carrot of change he took a huge step backwards claiming that rates will remain at their low levels until unemployment falls and he also stated that this would likely take 2 years," says Harborne.

The US Dollar got hammered from all sides with both the GBP and EUR breaking through key resistance levels and pushing on to fresh highs.

The Euro was the main winner though and we did see the pound fall off against the Euro back to levels it had begun the day at.