EUR/GBP extends downside to near 0.8300, UK Retail Sales jump 0.3% MoM in September

• EUR/GBP softens to near 0.8305 in Friday’s early European session, down 0.23% on the day. 
• The UK Retail Sales rose 0.3% MoM in September vs. -0.3% expected. 
• The dovish remarks of the ECB weigh on the Euro against the GBP. 

The EUR/GBP cross loses traction to around 0.8305 on Friday during the early European trading hours. The Pound Sterling (GBP) strengthens after the release of UK Retail Sales data for September. Later on Friday, the Eurozone Current Account for August will be published. 

Data released by the Office for National Statistics on Friday showed that UK Retail Sales increased 0.3% MoM in September from a rise of 1.0% in August. This figure came in stronger than the estimations of a decline of 0.3%. On an annual basis, Retail Sales in the UK climbed 3.9% in September versus  2.3% (revised from 2.5%) prior, above the consensus of 3.2%. 

The GBP attracts some buyers in an immediate reaction to the encouraging UK Retail Sales and drags the cross lower to the lowest level since April 2022. However, the rising expectation that the Bank of England (BoE) will lower borrowing costs by 25 basis points (bps) at its upcoming meeting in November and December after a surprise fall in the UK Consumer Price Index (CPI) inflation might cap the GBP’s upside. 

On the other hand, the Euro (EUR) remains under selling pressure after the European Central Bank (ECB) decided to cut the deposit rate by a further 25 bps at its October meeting as inflation in the Eurozone eased to 1.8% in September, below the ECB’s 2% target. 

"We believe that downside risks to growth in a context of easing inflationary pressure will lead to more rate cuts starting in December and continuing in 2025 until interest rates are back around a neutral level, that the ECB itself estimates around 2%," noted Gianluigi Mandruzzato, a senior economist at EFG Asset Management.