EUR/GBP extends losses and approaches 0.8300 after German retail sales

• EUR/GBP loses ground due to the reduced probability of another BoE rate cut this year.
• BoE’s Lombardelli requires clearer signs of easing inflationary pressures before considering further rate cuts.
• German retail sales rose 1.0% year-on-year in October and were well below the expected 3.2% and previous 3.8%.

EUR/GBP extends its losses for the fourth consecutive session, trading around 0.8310 during Asian hours on Friday. The British Pound (GBP) appreciates as traders have been reducing their bets on another rate cut by the Bank of England (BoE) this year after data released last week showed underlying price growth in the UK it accelerated in October.

During a speech at King’s Business School on Monday, BoE deputy governor Clare Lombardelli highlighted the need for clearer signs of easing inflationary pressures before considering further rate cuts. Lombardelli also warned of the risks associated with inflation above the BoE’s target. It highlighted concerns about wage growth stabilizing at 3.5%-4.0% and the Consumer Price Index (CPI) remaining around 3% instead of the 2% target, which could present significant challenges for policy. .

Economic data releases remain thin for the United Kingdom (UK), with an equally light calendar expected next week. The latest Financial Stability Report from the Bank of England (BoE) will be released to the markets at the beginning of the next US market session on Friday. The release is overwhelmingly unlikely to boost much momentum in the Sterling markets.

European Central Bank (ECB) policymakers have expressed concerns about the Eurozone’s slowing economic growth, raising expectations of a rate cut in December. However, uncertainty remains over the size of the potential drawdown as the market remains divided.

Traders are now closely watching Friday’s release of Eurozone Harmonized Index of Consumer Prices (HICP) data. Core HICP inflation is projected to rise to 2.8% year-on-year in November, compared to 2.7% in October. This increase could complicate matters for ECB officials, many of whom have recently sought to reassure investors about further rate cuts despite rising inflation pressures.