The EUR/GBP cross declines to near 0.8660 during the early European trading hours on Thursday. The Euro (EUR) weakens against the Pound Sterling (GBP) following the downbeat German Retail Sales data. The preliminary readings of Gross Domestic Product (GDP) from Germany and the Eurozone are due later on Thursday. Also, the European Central Bank (ECB) and the Bank of England (BoE) interest rate decisions will be in the spotlight.
Data released by Destatis on Thursday showed that German Retail Sales, a key measure of consumer spending, fell 2.0% MoM in March. This figure followed a decline of 0.3% in February (revised from -0.6%) and came in weaker than the expectations of a 0.1% decrease.
On an annualized basis, Retail Sales dropped 2.0% in March, versus an estimated rise of 0.5% and the prior release of 0.9% growth (revised from 0.7%). The EUR attracts some sellers in an immediate reaction to the weaker German economic data.
The ECB is widely expected to keep interest rates unchanged at its policy meeting on Thursday due to high uncertainty. Nonetheless, rising inflation, driven by energy price volatility from the Iran war, has raised the expectation of a rate hike in June. Economists predict a quarter-point hike at June’s meeting, and markets now fully price two additional ones after that before the year is out, according to Bloomberg.
The BoE is likely to keep interest rates on hold at its April policy meeting on Thursday as it awaits the economic fallout from the Iran war. Traders will closely monitor the speech from BoE Governor Andrew Bailey for any suggestions that higher borrowing costs are likely to be needed.
“The hikes fully priced into financial markets were already weighing on the economy, reducing the likelihood that the BoE will actually have to raise Bank Rate, at least for now,” said Andrew Wishart, senior UK economist at Berenberg.
Source: https://www.fxstreet.com/news/eur-gbp-softens-to-near-08650-on-weak-german-retail-sales-ecb-and-boe-rate-decisions-loom-202604300700
