EUR/GBP rebounds to 0.8550 on upbeat Euro Retail Sales, UK Spring Budget eyed

• EUR/GBP finds support as monthly Eurozone Retail Sales grew by 0.1% as expected.
• The ECB is expected to keep key lending rates unchanged at 4.5% on Thursday.
• The Pound Sterling will dance to the tunes of UK Spring budget.

The EUR/GBP pair finds some buying interest around 0.8550 as the Eurozone Retail Sales data for January remains better than expectations. The Eurostat reported that monthly Retail Sales grew by 0.1% as expected. In December, the Retail Sales were down by 0.6%. The annual Retail Sales contracted at a slower pace of 1.0% against 1.3% decline expected by market participants.

While the pace of decline in Retail Sales was slower than expectation, it cannot be denied that individuals are facing the cost-of-living crisis due to higher interest rates by the European Central Bank (ECB) and sticky price pressures.

Market participants remain uncertain about when the ECB will start reducing interest rates as the outlook of the shared continent is vulnerable. The Eurozone economy didn’t show growth in the second half of 2023 as the ECB is maintaining interest rates in the restrictive trajectory so that inflation must return to the desired target of 2%.

Going forward, the interest rate decision from the ECB on Thursday will guide the Euro. The ECB is expected to keep its Main Refinancing Operations Rate unchanged at 4.5%.

On the Pound Sterling front, investors await the United Kingdom’s budget 2024 to be released by Chancellor Jeremy Hunt at 12:30 GMT. Hunt is expected to announce a two percentage-point cut to National Insurance Contributions (NICs), which will result in additional saving of 450 pounds to salaried individuals.

It is expected that the scope of fiscal stimulus would be limited as the government is worried about high price pressures.