EUR/GBP retraces recent gains following German Retail Sales, inches lower to near 0.8560

• EUR/GBP faced challenges after Germany’s Retail Sales data on Thursday.
• January’s German Retail Sales (YoY) decreased by 1.4%, against the expected 1.5% and 1.7% prior.
• BoE Catherine Mann emphasized that the spending habits of Britons pose a challenge in curbing inflation.

EUR/GBP edges lower to near 0.8560 during the early European session on Thursday, retracing its recent gains. The Euro (EUR) encountered difficulties following Germany’s Retail Sales data. Additionally, disappointing data from the Eurozone on Wednesday might have put downward pressure on the Euro, consequently, undermining the EUR/GBP pair.

German Retail Sales (YoY) declined by 1.4% in January, against the expected 1.5% and 1.7% prior. While a 0.4% decline was recorded in monthly sales of the German retail sector against the expected growth of 0.5%. Economic sentiment declined in February, dropping from 96.1 to 95.4, which fell short of estimates for an improvement to 96.7. Similarly, Consumer Confidence revealed an economic downturn with a consistent reading of -15.5 as expected. Furthermore, market participants are likely awaiting Consumer Price Index, and Unemployment data on Thursday from Germany.

On Wednesday, Bank of England’s (BoE) Catherine Mann remarked that the spending habits of affluent British citizens pose a challenge in curbing inflation. Despite this, market sentiment suggests that the BoE is likely to initiate interest rate cuts soon, which could potentially limit the losses of the EUR/GBP cross.

However, earlier in the week, Bank of England policymakers expressed the need for more evidence indicating a decrease in inflation toward the 2% target before contemplating reductions in key lending rates. BoE Deputy Governor Dave Ramsden emphasized the necessity for further evidence indicating a moderation of inflationary pressures before considering interest rate cuts.