- EUR/GBP loses traction to around 0.8650 in Wednesday’s early European session.
- German Retail Sales rose 4.9% YoY in June vs. 1.6% prior.
- The UK central bank is poised to slow quantitative tightening after a rise in yields.
The EUR/GBP cross trades on a negative note near 0.8650 during the early European session on Wednesday. The Euro (EUR) weakens against the Pound Sterling (GBP) despite the upbeat German economic data. Later on Wednesday, the preliminary reading of Gross Domestic Product (GDP) for the second quarter (Q2) from Germany and the Eurozone will be in the spotlight.
Data released by Destatis on Wednesday showed that German Retail Sales rose 1.0% month-over-month in June, compared to a 0.6% decline in May (revised from -1.6%). This figure came in above the market consensus of 0.5%. On an annual basis, Retail Sales climbed 4.9% in June versus 2.6% prior (revised from 1.6%). The EUR remains weak in an immediate reaction to the stronger-than-expected German Retail Sales data.
The United States (US) and the European Union (EU) are rushing to finalize the final details of a new trade agreement before US President Donald Trump’s Friday deadline for reaching deals with countries other than China. Tariff uncertainty is likely to weigh on the shared currency in the near term.
On the other hand, cooling labor market conditions and elevated inflationary pressures in the United Kingdom (UK) might convince the Bank of England (BoE) to cut the interest rate in its August meeting. This, in turn, might drag the GBP lower and act as a tailwind for the cross.
Additionally, the BoE is expected to slow quantitative tightening, at which it shrinks its 558 billion-pound ($754 billion) holdings of government bonds, and economists hope next week will shed some light on its longer-term goals for the stockpile, per Reuters.
