EUR/GBP remains subdued near 0.8700 following UK Retail Sales, awaits PMI data

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EUR/GBP inches lower after two days of gains, trading around 0.8710 during the Asian hours on Friday. The currency cross holds losses following the United Kingdom (for September.

EUR/GBP holds losses after the release of UK Retail Sales data on Friday.
The UK Retail Sales rose 0.5% MoM in September, against the 0.2% decline expected and the 0.6% increase prior.
Traders will observe the preliminary HCOB Purchasing Managers’ Index data from Germany and the Eurozone, along with the S&P Global UK PMI.

EUR/GBP inches lower after two days of gains, trading around 0.8710 during the Asian hours on Friday. The currency cross holds losses following the United Kingdom (for September. The preliminary readings of HCOB Purchasing Managers’ Index (PMI) from Germany and the Eurozone, along with the S&P Global UK PMI, are scheduled to be released next.

The UK Retail Sales climbed 0.5% month-over-month (MoM) in September after advancing 0.6% in August (revised from 0.5%). Markets projected a 0.2% decline in the reported month. The annual sales grew 1.5%, surpassing the expected 0.6% and 0.7% prior readings. Meanwhile, Core Retail Sales (excluding fuel) rose 2.3% year-over-year, against the expected 0.7% and 1.3% prior.

The UK Retail Sales reported a surprise uptick, though it failed to help the Pound Sterling (GBP) hold ground against its peers amid rising bets of more interest rate cuts by the Bank of England (BoE) in the remaining year.

The British Pound faced challenges after BoE Monetary Policy Committee (MPC) member Swati Dhingra signaled on Thursday that United States (US) tariffs could put downward pressure on prices in the medium term.

The GfK Consumer Confidence Index for the United Kingdom improved to -17 in October, from -19 in September, beating the expected -20 reading as shoppers prepared for Black Friday sales despite lingering concerns about the upcoming Budget.

The EUR/GBP cross gained ground as the Euro (EUR) received support after the European Commission reported the preliminary Consumer Confidence, which improved to -14.2 in October, the highest in 8 months, and up from -14.9 in September, beating market expectations of -15. The stronger consumer confidence in Eurozone economic activity indicated support from lower European Central Bank (ECB) borrowing costs and easing inflation in recent months.

Economic Indicator

Retail Sales (YoY)

The Retail Sales data, released by the Office for National Statistics on a monthly basis, measures the volume of sales of goods by retailers in Great Britain directly to end customers. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the YoY reading comparing sales volumes in the reference month with the same month a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.