EUR/GBP weakens below 0.8500 amid weaker German Industrial Production, Labour Party wins UK election

• EUR/GBP trades with a mild bearish bias around 0.8475 in Friday’s early European session.
• Labour Party has won 337 seats in the parliamentary election, implying it now holds a majority in the House of Commons. 
• Germany’s industrial sector contraction deepened in May. 

The EUR/GBP cross trades with mild losses near 0.8475 on Friday during the early European session. The Pound Sterling (GBP) edges higher as the UK’s Labour Party led by Keir Starmer appears to be headed for a huge majority in the 2024 UK election, Reuters reported on Friday. Later in the day, Eurozone Retail Sales for May will be released. 

The UK’s opposition Labour Party has won 337 seats in the parliamentary election, implying it now holds a majority in the 650-seat strong House of Commons, Reuters reported on Friday, citing broadcaster ITV. Derek Halpenny, head of FX research at MUFG Bank, believes that a Labour victory may benefit the Pound Sterling (GBP). A large majority would give Labour a strong mandate for governing and potentially lead to greater political stability.

Nonetheless, the expectation that the Bank of England (BoE) will start reducing interest rates from the August meeting might drag the Cable lower. 

On the Euro front, data released by  Destatis reported Friday that German Industrial Production for May came in weaker than the market expectation. The figure dropped 2.5% MoM in May from a decline of 0.1% in the previous reading. On an annual basis, the German Industrial Production fell 6.7% YoY in May

The Euro (EUR) posts modest losses in response to the weaker in outputs of the German factories. Traders will take more cues from the Eurozone Retail Sale data, which is projected to improve to 0.1% YoY in May.