EUR/GBP stabilizes above 0.8700 as UK Political crisis escalates, British Retail Sales eyed

• EUR/GBP has shifted its business above 0.8700 amid escalating UK Political crisis.
• Higher interest rates, price pressures, and supply chain disruptions have trimmed retail spending.
• The Eurozone Consumer Confidence data is expected to drop to -30.0.

The EUR/GBP pair has established confidently above the critical hurdle of 0.8700 in the Tokyo session. In the New York session, the asset witnessed a responsive buying action below 0.8680 after novel UK Prime Minister Liz Truss resigned. The resignation of UK Leader Truss came after cabinet ministries and MPs lost confidence in her leadership skills. Apart from that, bewildered decisions from UK’s Truss on taxation decisions escalated financial chaos.

General elections for the next UK Prime Minister will take place on October 28 with Rishi Sunak, Penny Mordaunt, Ben Wallace, and ex-UK PM Boris Johnson himself as potential candidates for the role.

This week, the release of the escalated inflationary pressures bolstered the odds of bigger rate hikes by the Bank of England (BOE). The headline inflation rate has returned to the double-digit territory, therefore, the central bank is left with no other option than to hike interest rates sooner. Also, the core Consumer Price index (CPI) elevated to 6.5%.

On Friday, the release of the UK Retail Sales data will be of utmost importance. The Retail Sales data is seen declining by 5% for September on an annual basis. The decline is lower than the prior drop by 5.4%. Retail demand has tumbled amid higher interest rates, soaring price pressures, and supply chain disruptions led by the Russia-Ukraine war.

Meanwhile, euro investors are awaiting the release of the Eurozone Consumer Confidence data. The sentiment data is expected to decline to -30.0 vs. the prior release of -28.8. It is worth noting that the economic catalyst has remained double-digit with negative sentiment consecutively for the past seven months. This could bring some volatility in the cross ahead.