EUR/GBP edged lower after two consecutive days of gains, trading around 0.8710 during the Asian session on Friday. The pair held its losses after the release of the United Kingdom’s September retail sales data, as traders awaited the upcoming HCOB Manufacturing and Services PMI readings from Germany and the Eurozone, along with the S&P Global UK PMI later in the day.
UK retail sales surprise to the upside
UK retail sales climbed 0.5% month-on-month (MoM) in September, following an upwardly revised 0.6% increase in August (initially 0.5%). Markets had anticipated a 0.2% decline. On an annual basis, sales rose 1.5%, beating both the expected 0.6% and the previous 0.7% readings. Core retail sales, which exclude fuel, jumped 2.3% year-over-year, far exceeding the consensus forecast of 0.7% and the prior 1.3% growth.
Strong data fails to lift GBP amid dovish BoE outlook
Despite the stronger-than-expected retail figures, the Pound Sterling (GBP) failed to capitalize on the data, weighed down by growing expectations of further Bank of England (BoE) rate cuts later this year.
BoE Monetary Policy Committee (MPC) member Swati Dhingra commented on Thursday that US tariffs could exert downward pressure on prices in the medium term, reinforcing the market’s dovish sentiment toward UK interest rates.
UK consumer sentiment improves ahead of holiday season
The GfK Consumer Confidence Index for the UK improved to -17 in October from -19 in September, surpassing expectations of -20. The data suggests British consumers are becoming slightly more optimistic ahead of Black Friday sales, despite ongoing concerns about the government’s upcoming Budget statement.
Euro finds support from stronger Eurozone confidence data
The Euro (EUR) gained modest support after the European Commission’s preliminary Consumer Confidence Index for October rose to -14.2, marking its highest level in eight months and improving from -14.9 in September. The reading also beat market expectations of -15.0, reflecting an improvement in sentiment amid lower European Central Bank (ECB) borrowing costs and easing inflationary pressures across the Eurozone.
Outlook
Traders will closely watch Friday’s Eurozone and UK PMI releases for fresh insights into economic momentum across both regions. The data could provide short-term direction for EUR/GBP, which remains capped near 0.8710, with the 0.8700 psychological level acting as immediate support.
