EUR/GBP moves down despite bad retail sales in the United Kingdom

• The euro slides modestly in front of the sterling pound on Friday, despite a weak data of retail sales of the United Kingdom.
• Retail sales of the United Kingdom fall 2.7% in May, the most pronounced monthly fall since December 2023.
• The EUR/GBP is negotiated about 0.8530, slightly retreating the maximum two months.

The Euro (EUR) lowers the pound sterling (GBP) on Friday, unable to capitalize on the disappointing retail sales data of the United Kingdom published earlier in the day. However, the sterling pound remains resistant, even receiving support from the decision of the Bank of England (BOE) to maintain its key interest rate without changes on Thursday, which has helped anchor the expectations of a path of cautious policy in the future.

The EUR/GBP crossing has been operating on positive land during the last two weeks, promoted by a renewed demand for the euro and mixed foundations of the United Kingdom. At the time of writing, the pair is being negotiated about 0.8530 during the American negotiation hours, sliding from its stronger levels in almost two months.

Although the general bias is still inclined, some short -term profits and a resistant sterling pound could limit additional profits in the next few days.

New data from the United Kingdom National Statistics Office revealed that retail sales volumes decreased by 2.7% in May, marking the most pronounced monthly drop since December 2023 and significantly worse than the modest fall of 0.5% that economists had anticipated. The contraction was widespread, with households reducing food, clothing and home goods expenses, since persistent inflation and the highest indebted costs continued to strangle the budgets. In interannual terms, sales fell 1.3%, erasing the robust profit of 5% in April and underlining the fragile state of consumer demand in the United Kingdom for summer.

In the front of the euro, the currency continues to sail a delicate balance between inflation in descent and an still strong exchange rate. Recent comments from officials of the European Central Bank (ECB), including Villeroy de Galhau and Luis de Guindos, have reinforced the expectations of additional feature cuts this year as inflation decreases in the block. Notably, the general inflation of the euro zone fell below the objective of 2% of the ECB in May for the first time in months, while the underlying inflation also dropped, giving margin policy responsible to maintain a path of cautious flexibility. However, the resilience of the euro against the US dollar (USD) and other main peers complicates the prospects, since a stronger currency can reduce imported inflation and decelerate economic impulse.

Looking ahead, operators will focus on the preliminary data of the purchasing managers index (PMI) on Monday from both the euro zone and the United Kingdom to obtain new clues about the economic impulse. Any surprise weakness could change expectations about the next MDA and BOE movements, adding volatility to the EUR/GBP crossing at the beginning of next week.