Home Forex EUR/GBP stretches higher to near 0.8570 ahead of UK retail sales and German PPI

EUR/GBP stretches higher to near 0.8570 ahead of UK retail sales and German PPI

by SuperiorInvest


  • EUR/GBP is trying to recover recent losses ahead of UK retail sales data.
  • Hot UK inflation numbers are influencing traders to lower their expectations for a BoE rate cut.
  • ECB President Lagarde’s indication of a rate cut weighs on the euro.

EUR/GBP rebounds from January lows at 0.8555 on Thursday. EUR/GBP is trading higher near 0.8570 during the Asian session on Friday. Sterling struggles with United Kingdom (UK) retail sales data due later in the day. The monthly retail sales data is expected to fall 0.5%, moving from a previous increase of 1.3%. While the year-on-year result could increase to 1.1% from 0.1% previously.

Positive UK inflation data released on Wednesday provided support for the British Pound (GBP) and put downward pressure on the EUR/GBP cross. At the same time, traders lowered their expectations for a rate cut by the Bank of England (BoE). The market, which had previously priced in an 80% chance of a 25 basis point cut by the BoE on Tuesday in May, has now adjusted those odds to 50%. This shift in expectations could offer additional support to the GBP while acting as a headwind EUR/GBP go over.

On the other hand, speculation about a possible rate cut by the European Central Bank (ECB) in September contributes to the weakening of the euro (EUR). Market sentiment picked up when ECB President Christine Lagardewho spoke at the World Economic Forum (WEF) in Davos, hinted that a cut in interest rates could be considered by the summer.

President Lagarde highlighted the potential peak of the ECB’s interest rates and drew attention to the central bank’s dependence on economic data. It acknowledged the existence of lingering uncertainties and indicators that are not yet firmly anchored, contributing to divergent views on future monetary policy. German Producer Price Index Data (PPI) will be monitored on Friday.

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