tradingkey.logo

EUR/GBP gathers strength above 0.8300 after downbeat UK Retail Sales data

FXStreetNov 22, 2024 7:20 AM

  • EUR/GBP strengthens to around 0.8330 in Friday’s early European session, up 0.17% on the day.
  • The UK Retail Sales came in at -0.7% MoM in October vs. 0.1% prior. 
  • Expectations for more aggressive rate cuts by the ECB might cap the Euro's upside.


The EUR/GBP cross gains momentum to near 0.8330 during the early European session on Friday. The Pound Sterling (GBP) weakens after the release of UK Retail Sales data for October. Later on Friday, traders await the preliminary Eurozone HCOB Purchasing Managers Index (PMI) and the European Central Bank's (ECB) President Lagarde speech for fresh impetus. 

Data released by the Office for National Statistics (ONS) on Friday showed that UK Retail Sales declined 0.7% MoM in October versus a 0.1% increase (revised from 0.3%) in September. This figure came in below the market consensus of -0.3%. Meanwhile, Retail Sales, stripping the auto motor fuel sales, fell by 0.9% MoM in October, compared to a 0.1% rise (revised from 0.3%) in the previous reading, missing the estimation of a 0.4% decline. 

The GBP attracts some sellers in an immediate reaction to the downbeat UK Retail Sales and acts as a tailwind for the EUR/GBP cross. The attention will shift to the preliminary UK S&P Global/CIPS PMI data, which is due later on Friday. 

On the other hand, the rising speculation for more aggressive interest rate cuts by the European Central Bank (ECB) weighs on the shared currency. The ECB policymaker Yannis Stournaras said earlier this week that the central bank will reduce interest rates by 0.25% in December, with further cuts possible in 2025. Additionally, Bank of Italy governor Fabio Panetta said the ECB must commit to faster interest rate cuts in a bid to lift the Eurozone economy. However, Panetta also called on the ECB to ditch its current “meeting-by-meeting” guidance that avoids a longer-term commitment to its monetary policy. 



ECB FAQs

What is the ECB and how does it influence the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

What is Quantitative Easing (QE) and how does it affect the Euro?

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

What is Quantitative tightening (QT) and how does it affect the Euro?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.

Related Instruments

Recommended Articles

tradingkey.logo
tradingkey.logo
Intraday Data provided by Refinitiv and subject to terms of use. Historical and current end-of-day data provided by Refinitiv. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.
* References, analysis, and trading strategies are provided by the third-party provider, Trading Central, and the point of view is based on the independent assessment and judgement of the analyst, without considering the investment objectives and financial situation of the investors.
Risk Warning: Our Website and Mobile App provides only general information on certain investment products. Finsights does not provide, and the provision of such information must not be construed as Finsights providing, financial advice or recommendation for any investment product.
Investment products are subject to significant investment risks, including the possible loss of the principal amount invested and may not be suitable for everyone. Past performance of investment products is not indicative of their future performance.
Finsights may allow third party advertisers or affiliates to place or deliver advertisements on our Website or Mobile App or any part thereof and may be compensated by them based on your interaction with the advertisements.
© Copyright: FINSIGHTS MEDIA PTE. LTD. All Rights Reserved.