EUR/GBP faces pressure near 0.8550 as Eurozone Retail Sales contract as expected

• EUR/GBP finds nominal selling pressure after Eurozone Retail Sales contracted by 0.2%, in line with expectations.
• Households’ demand in Eurozone softens as the real income is squeezed due to persistent inflationary pressures.
• UK’s service sector starts shrinking as consumer spending slows due to rising prices.

The EUR/GBP pair finds some selling pressure near 0.8550 after recovering from a two-week low around 0.8534 in the European session. The cross faces pressure as Eurozone Retail Sales for July contracted as expected by market participants.

Eurostat reported that Retail Sales contracted by 0.2%, in line with expectations. The economic data was expanded by 0.2% in June. On an annual basis, the economy maintains a contraction pace of 1.0% while investors forecast consumer spending shrinking by 1.2%.

Households’ demand in the Eurozone softens as the real income of individuals is squeezed due to persistent inflationary pressures. Higher interest rates by the European Central Bank (ECB) have elevated periodic installment obligations and the burden of the same has squeezed the spending power of the general public.

Meanwhile, investors remained mixed about whether the ECB will raise interest rates further or will keep the current monetary policy unchanged. ECB Governing Council member Klaas Knot told Bloomberg on Wednesday that investors betting against an interest rate increase next week are possibly underestimating the likelihood of its happening.

On the Pound Sterling front, the United Kingdom economy is facing the repercussions of aggressively restrictive monetary policy by the Bank of England (BoE). UK’s service sector starts shrinking as consumer spending slows due to rising prices. S&P Global reported that the Services PMI for August dropped to 49.5 vs. July’s reading of 51.5 but remained higher than estimates of 48.7. The economic data remains below the 50.0 threshold for the first time since January.