EUR/GBP breaks below 0.8400 following UK Retail Sales data

EUR/GBP continues to lose ground, trading around 0.8390 during Friday’s Asian hours, following the release of UK Retail Sales data for August. Retail Sales rose by 1.0% month-over-month, exceeding the previous increase of 0.5% and the expected rise of 0.4%. Meanwhile, the annualized rate increased to 2.5%, up from the previous 1.5% rise.

The Pound Sterling (GBP) received support from the Bank of England’s (BoE) decision to maintain its interest rate at 5% on Thursday, as widely anticipated. The BoE had previously signaled the possibility of rate cuts earlier in the summer with a quarter-point reduction at the last meeting, but this move may have been premature.

Out of the nine Monetary Policy Committee (MPC) members, BoE external member Swati Dhingra voted for cutting interest rates for the second consecutive time, while the remaining members supported maintaining rates at their current levels. Investors had anticipated that two MPC members would back a dovish policy decision.

On the euro side, Germany's Producer Price Index (PPI) showed a consistent month-over-month increase of 0.2%. However, the annual PPI fell by 0.8%, against the expected 1.0% decline. Traders are likely to focus on European Central Bank (ECB) President Christine Lagarde’s speech at the Michel Camdessus Central Banking Lecture in Washington, DC, on Friday.

European Central Bank (ECB) policymakers are divided on the pace of policy easing due to differing views on the inflation outlook. ECB Governing Council member Peter Kazimir and Deutsche Bundesbank President Joachim Nagel have expressed a desire to see more evidence that inflation will return to the levels the bank aims for, according to Reuters.