Soft German Retail Sales weigh on Euro against British Pound as traders await BoE rate decision

• EUR/GBP comes under mild pressure near 0.8345 as European trading begins on Tuesday.
• An interest rate increase is expected from the BoE at Thursday’s November policy meeting.
• September German Retail Sales registered an unexpected 2.0% MoM decline.

Sterling’s strength against the Euro (EUR), driven by hawkish Bank of England (BoE) rate expectations, leaves EUR/GBP trading slightly lower near 0.8345 in Tuesday’s early European session. The British Pound (GBP) is gaining ground ahead of the policy decision.

Economists surveyed by Reuters expect the BoE to lift the Bank Rate from 3.75% to 4.0% at Thursday’s November policy meeting. Such a move would be the first increase since August 2023, when inflation remained above the BoE’s 2% target.

For further direction, traders will watch the press conference by BoE Governor Andrew Bailey. Hawkish remarks from the central bank’s policymakers could lend near-term support to the British Pound (GBP).

Alexander Harvey, UK economist at consultancy Oxford Economics, said: "While we don't expect a clear steer from the Committee on how many hikes they're planning, it's possible that the meeting minutes or Bailey ... signal that Bank Rate is unlikely to reach the level that is priced in by financial markets,"

The EUR could face pressure from Germany’s weaker-than-forecast Retail Sales figures. September sales contracted by 2.0% MoM after a previous increase of 1.2%, undershooting the market’s expectation of 0.4% growth. On an annualised basis, September Retail Sales stood at -2.3%, following a 0.3% fall in August.

Could BoE guidance limit Pound gains as a tightening cycle begins?

A fresh tightening cycle is widely expected to begin with Thursday’s “Bank of England (BoE) policy decision and Monetary Policy Report (MPR)”, according to strategists at Brown Brothers Harriman. They describe the BoE as “widely expected to start tightening with a 25bps hike to 4.00% after standing pat all year.” The strategists say “firmer UK inflation and economic activity back the move,” and expect the vote to be split “7-2 with doves Alan Taylor and Swati Dhingra supporting a hold.”

The extent of any Pound gains may nevertheless hinge on the projections. BBH warns that “BoE guidance and the updated MPR will test market expectations for 100bps of tightening over the next twelve months.” The strategists argue that “persistent spare capacity across the forecast horizon would strengthen the case for pricing out hikes and limit GBP upside,” implying that subdued Bank forecasts could prevent a hawkish policy turn from delivering lasting Pound strength.

Does Greene’s warning on stalled wage disinflation keep GBP rate hike risks in focus?

A hawkish emphasis in BoE’s Greene speech supports a firmer GBP bias, even though its FXS Speechtracker score of 7.4 exactly matches Greene’s historical average. The focus on stalled wage disinflation and a heightened risk of second-round effects signals a clear hawkish tilt. With Greene highlighting pay growth nearer 3.5%, wage disinflation stalled above levels compatible with 2% inflation, and an unexpectedly resilient economy, the speech suggests little appetite for rapid rate cuts.

Greene’s observation that labour market slack may have peaked adds weight to the possibility of persistent underlying inflation pressures and supports the call to act proactively against second-round effects. Taken together, resilient demand and sticky wage dynamics underpin the speech’s message, supporting GBP yields and preserving upside risks for the currency.

Technical Analysis: Can oversold conditions ease EUR/GBP’s bearish pressure?

Bearish pressure remains firmly in place on the EUR/GBP daily chart. Trading below both the 20-period Bollinger middle band and the 100-day moving average, the cross faces a dense cluster of overhead resistance that continues to restrict rallies. At around 22.7, the Relative Strength Index (14) is deep in oversold territory. Downward momentum therefore remains strong, but short-covering rebounds are possible; a lasting recovery would require the pair to regain key resistance.

The first upside hurdle is the Bollinger middle band near 0.8405, ahead of the upper band around 0.8500. Any corrective rally would then encounter a more substantial barrier at the 100-day moving average of 0.8535. Immediate downside support lies at the lower Bollinger band, approximately 0.8310. A decisive breach would leave room for the downtrend to extend towards fresh lows.

(The technical analysis of this story was written with the help of an AI tool. Know more.)