EUR/GBP treads waters below 0.8550, eyes Eurozone Retail Sales

• EUR/GBP struggles to recover from the previous day’s losses on the Eurozone’s weaker data
• UK’s better-than-expected PMIs reinforce the weakening of the cross pair.
• Investors await the Eurozone's Retail Sales for further indications on the economic outlook.

EUR/GBP grapples to recover from the previous day’s losses, treading waters around 0.8540 during the Asian session on Wednesday. The pair is experiencing pressure due to the disappointing data released from the Eurozone on Tuesday. While the economic activities statistics from the United Kingdom (UK) showed improvement.

As said, the Eurozone Producer Price Index (PPI) for July showed a decline to -0.5% on month-on-month and -7.6% on a yearly basis from the previous readings of -0.4% and -3.4%, respectively. While HCOB Composite PMI growth for August fell to 46.7 from the previous reading of 47, which was expected to remain consistent.

The disappointing data has raised the probability of the European Central Bank (ECB) moving away from its more aggressive stance, driven by worries of a potential economic downturn. Consequently, this is placing downward pressure on the Euro (EUR).

ECB President Christine Lagarde emphasized the importance of central banks maintaining a firm grip on inflation expectations. Similarly, Joachim Nagel, President of the Deutsche Bundesbank and an ECB Council member, expressed his backing for price stability, although he abstained from providing further details at that particular moment.

On the British front, the S&P Global/CIPS Composite PMI for August surpassed expectations, reaching 48.6, which was higher than the anticipated 47.9 but slightly lower than the previous reading of 47.9. The services survey posted a reading of 49.5, exceeding the previous reading of 48.7. The index was expected to be consistent.

Market participants continue to believe that the Bank of England (BoE) will raise interest rates by a quarter basis points (bps) in the September meeting. Investors will likely monitor BoE Monetary Policy Report Hearings scheduled to be released on Thursday. The report may provide insights into the UK economic outlook and BoE’s monetary policy strategy.

On the Eurozone docket, datasets are set to be released later in the day, including German Factory Orders and Eurozone Retail Sales for July.