The EUR/GBP exchange rate edged higher toward 0.8300 during the early European session on Friday, with the British Pound (GBP) facing downward pressure following weaker-than-expected UK Retail Sales figures.
Data from the Office for National Statistics revealed that UK Retail Sales rose by just 0.2% month-on-month in November, a significant decline from the previous month’s 0.7% drop. The result fell short of the market’s forecast of a 0.5% increase. On an annual basis, retail sales grew by 0.5%, down from the 2.0% rise in October (revised from 2.4%), and below the expected 0.8% increase. This disappointing data prompted immediate selling of the GBP, providing momentum for the EUR/GBP pair.
Meanwhile, the Euro is facing potential headwinds as the European Central Bank (ECB) is expected to continue easing monetary policy in the coming year. ECB Governing Council member Gediminas Simkus signaled on Thursday that the central bank should persist in lowering borrowing costs at the current pace, citing inflation as increasingly under control. ECB President Christine Lagarde also suggested that further rate cuts could be on the horizon if inflation data meets expectations.
The ECB’s first rate-setting meeting of 2025 will take place on January 30, with investors anticipating a more aggressive pace of rate cuts next year, which could put downward pressure on the Euro against the British Pound.
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