The EUR/GBP cross advanced to near 0.8330 during the early European session on Friday, benefiting from a weaker Pound Sterling (GBP) following disappointing UK Retail Sales data. Attention now turns to the Eurozone PMI data and European Central Bank (ECB) President Christine Lagarde’s upcoming speech for further direction.
UK Retail Sales Drop Sharply in October
The UK’s Office for National Statistics (ONS) reported that Retail Sales contracted by 0.7% month-on-month (MoM) in October, significantly below the market expectation of a 0.3% decline. This follows a downwardly revised 0.1% gain in September, originally reported as 0.3%. Excluding automotive fuel, sales fell by 0.9% MoM, underperforming forecasts of a 0.4% drop.
The disappointing data underscores the challenges facing the UK’s consumer-driven economy and prompted selling pressure on the GBP, aiding the EUR/GBP pair. Market participants now await the release of the UK’s preliminary S&P Global/CIPS PMI data later on Friday for further cues.
ECB Interest Rate Cut Speculations Curb Euro Strength
Despite its recent gains against the Pound, the Euro faces headwinds from rising expectations of aggressive interest rate cuts by the ECB. Policymaker Yannis Stournaras stated earlier this week that the central bank is likely to reduce rates by 25 basis points in December, with further easing anticipated in 2025.
Bank of Italy Governor Fabio Panetta added to the dovish tone, urging the ECB to expedite rate cuts to bolster the Eurozone economy. Panetta also called for an end to the ECB’s “meeting-by-meeting” policy stance, advocating for clearer long-term monetary policy commitments.
Market Focus: Eurozone PMI and Lagarde’s Speech
Traders now look to the Eurozone’s HCOB Purchasing Managers’ Index (PMI) figures, which are expected to shed light on the region’s economic activity. Additionally, ECB President Christine Lagarde’s speech later on Friday could influence market sentiment, particularly regarding the central bank’s policy direction.
Outlook for EUR/GBP
While the EUR/GBP cross has gained momentum, its trajectory remains tied to developments on both sides of the channel. Weak UK data and ECB rate cut expectations create a mixed landscape, with volatility likely to persist as traders digest incoming data and central bank signals.
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