EUR/GBP sticks to gains near multi-day top, just below mid-0.8800s post-Eurozone/UK PMIs

• EUR/GBP scales higher for the second straight day and climbs back closer to the weekly high.
• The dismal UK Retail Sales data is weighing on the GBP and acts as a tailwind for the cross.
• The mixed PMI prints from the Eurozone and the UK fail to provide any meaningful impetus.

The EUR/GBP cross gains positive traction for the second successive day on Friday and touches a four-day high, around the 0.8840-0.8845 region during the first half of the European session.

The British Pound’s relative underperformance on the last day of the week follows the disappointing release of the UK monthly Retail Sales figures and the mixed UK PMI prints. In fact, the UK Office for National Statistics reported that domestic Retail Sales contracted by 0.9% in March and sales excluding fuel dropped by 1% during the reported month, both missing consensus estimates.

Adding to this, the flash UK Manufacturing PMI delivers a negative surprise and drops further into contraction territory, to 46.6 in April. The weaker reading, to a larger extent, was offset by the better-than-expected Services PMI, which rose to 54.9 in April. This, however, fails to impress the GBP bulls or hinder the intraday positive move for the EUR/GBP cross, at least for the time being.

The shared currency, on the other hand, reacts little to the preliminary Eurozone PMI print. The data, meanwhile, indicated that the Eurozone economy is holding up fairly, which should allow the European Central Bank to push forward with its policy tightening. This, in turn, is seen as another factor pushing the EUR/GBP cross higher and remains supportive of the move up.

That said, rising bets for an additional interest rate hike by the Bank of England (BoE) might hold back traders from placing aggressive bullish bets around the EUR/GBP cross. In fact, the markets now see over a 90% chance of a 25-bps rate hike in May and the bets were lifted by the stronger UK consumer inflation figures released on Thursday. This, in turn, could cap any further gains.

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