• EUR/GBP cross trades without a clear direction on Friday.
• Mixed German figures and uneven Eurozone Retail Sales limit support for the single currency.
• Investors remain cautious ahead of UK employment data, a key driver for the British monetary policy outlook.

EUR/GBP trades around 0.8670 on Friday at the time of writing, virtually unchanged on the day, after failing to establish itself above 0.8690 on Thursday. The pair remains under short-term bearish pressure, with a weekly decline of nearly 0.3% and a drop of about 1.5% from the mid-November highs above 0.8800.

On the Eurozone side, macroeconomic data released in Germany provide only limited support to the Euro (EUR). Industrial Production rose by 0.8% in November, following a 2.0% increase in the previous month, beating market expectations for a decline. However, the trade balance deteriorated sharply, with the surplus narrowing to €13.1 billion from €16.9 billion in October, weighed down by a 2.5% fall in exports. This mixed picture revives concerns about the strength of the recovery in the Eurozone’s largest economy.

At the regional level, Eurozone Retail Sales rose by 2.3% YoY in November, above expectations, but the positive surprise fails to spark a sustained rebound in the Euro. Investors judge that these figures are not strong enough to alter expectations for the European Central Bank’s (ECB) monetary policy, which is still seen as being in a prolonged wait-and-see mode.

On the UK side, the macroeconomic calendar remains light, contributing to subdued moves in the Pound Sterling (GBP). The British currency nevertheless stays on the defensive after the downward revision to the S&P Global Services Purchasing Managers Index (PMI) earlier this week, which has fueled concerns about slowing growth amid still-elevated inflation. This policy dilemma complicates the task of the Bank of England (BoE) and, for now, prevents a deeper decline in the euro-pound pair.

Market focus now shifts to UK employment data, due on Monday. Developments in the labor market will be crucial in refining expectations for the Bank of England’s policy path, after the central bank recently signaled that any easing would follow a very gradual trajectory. In this environment of uncertainty and mixed macro signals, EUR/GBP is likely to continue trading without a clear short-term trend.