The EUR/GBP pair trades slightly lower around 0.8710 on Friday, giving back recent gains after the release of strong UK Retail Sales data. Investors now shift focus to the upcoming preliminary PMI readings from Germany, the Eurozone, and the United Kingdom for fresh direction.
UK Retail Sales Surprise to the Upside
Data from the Office for National Statistics (ONS) showed that UK Retail Sales rose 0.5% month-on-month (MoM) in September, beating expectations for a 0.2% decline and following a 0.6% increase in August (revised from 0.5%).
On a yearly basis, sales climbed 1.5%, well above forecasts of 0.6%, while Core Retail Sales (excluding fuel) advanced 2.3% year-on-year, compared with expectations of 0.7% and the previous 1.3%.
Despite the upbeat figures, the Pound Sterling (GBP) failed to extend gains, as markets continue to price in the likelihood of further Bank of England (BoE) rate cuts later this year amid subdued economic momentum.
BoE Comments and Consumer Sentiment
BoE Monetary Policy Committee (MPC) member Swati Dhingra noted on Thursday that US tariffs could exert downward pressure on UK prices in the medium term, reinforcing a dovish policy outlook.
Meanwhile, the GfK Consumer Confidence Index improved to -17 in October, up from -19 in September and above expectations of -20, suggesting slightly better consumer sentiment ahead of the holiday shopping season.
Euro Gains Modest Support
The Euro (EUR) found some support after the European Commission’s preliminary Consumer Confidence Index rose to -14.2 in October, its highest level in eight months, from -14.9 previously. The improvement signals that lower borrowing costs from the European Central Bank (ECB) and slowing inflation are helping stabilize household sentiment in the Eurozone.
Outlook
Traders now await the release of HCOB Manufacturing and Services PMIs for Germany and the Eurozone, along with the S&P Global UK PMI, which will offer fresh insights into regional economic performance and the monetary policy outlook on both sides of the Channel.