• EUR/GBP edges higher as markets reassess the BoE and ECB policy outlooks after Thursday’s decisions.
• Weaker UK Retail Sales data weighs on Sterling.
• ECB officials highlight uncertainty around the policy outlook.

The Euro (EUR) rebounds against the British Pound (GBP) on Friday, as investors reassess the monetary policy outlooks of both the Bank of England (BoE) and the European Central Bank (ECB) following their interest rate decisions on Thursday.

At the time of writing, EUR/GBP is trading around 0.8767, edging modestly higher as Sterling comes under mild pressure after weaker-than-expected UK Retail Sales data.

Data released by the UK Office for National Statistics showed that Retail Sales contracted modestly in November, reinforcing signs of softening consumer demand. Headline Retail Sales fell 0.1% MoM, missing market expectations for a 0.4% increase and following a sharp 0.9% decline in October. On an annual basis, sales rose 0.6%, undershooting forecasts of 0.9% and matching the previous reading.

On the monetary policy front, the Bank of England delivered a widely expected 25 basis point rate cut on Thursday, lowering the Bank Rate to 3.75%. However, the message was more cautious than the cut itself suggested. The close 5-4 vote split, with four members preferring to keep rates unchanged at 4.00%, showed that policymakers are increasingly divided on further easing. The BoE also said that while rates could move lower over time, future decisions are becoming a “closer call,” tempering expectations for an aggressive easing cycle.

On the Euro side, the European Central Bank kept its three key policy rates unchanged on Thursday, in line with market expectations. The ECB reiterated a cautious, data-dependent stance, stressing that future decisions will be taken on a meeting-by-meeting basis and guided by incoming economic and financial data, the inflation outlook and underlying price pressure.

Several ECB policymakers struck a cautious tone on Friday. Madis Müller said it is too early to speculate beyond the near term, noting that markets expect rates to stay at current levels for at least six months. José Luis Escrivá said the direction of the next move remains unclear, while Álvaro Santos Pereira warned that shocks remain possible despite policy being in a good place.

Looking ahead, attention turns to upcoming UK data on Monday, with focus on the release of Gross Domestic Product (GDP) figures for the third quarter.