EUR/GBP Declines Post UK GDP and Retail Sales Figures

The EUR/GBP pair fell to 0.8540 following the release of key economic data on Thursday. Mixed Gross Domestic Product (GDP) data and retail sales figures further weakened the strength of the Pound after the disappointing UK inflation data issued on Wednesday. The bearish economic outlook supports expectations for BoE rate cuts to control inflation and balance the economy.

The UK Q2 Gross Domestic Product (GDP) data show a quarterly growth rate of 0.6%, down from 0.7% in Q1. The annual growth rate is 0.9%, up from 0.3% in Q1, as expected. June’s monthly data highlighted the economic slowdown at the quarter-end, with business investment and net exports impacting the GDP. Current figures indicate that industrial production rose by 0.8%, services decreased by 0.1%, and construction increased by 0.5%. The latest UK Retail Sales data show a0.5% month-over-month shift in July, rebounding from a previous decline of 0.9%. The annual sales figure rose 1.4%, recovering from an earlier decline of 0.3%, meeting market forecasts.?

Impact on EUR/GBP

EUR/GBP continued to face losses following the UK Retail Sales data and preliminary Eurozone Gross Domestic Product (GDP). The robust retail sales figures indicate strong consumer demand, a key inflation indicator, which may reinforce expectations for further interest rate cuts by the Bank of England (BoE). In the Eurozone, GDP estimates can influence investor confidence, potentially reducing economic activity. These currency movements may prompt the European Central Bank to consider two potential rate cuts by October.

Impact on GBP/USD?

GBP/USD strengthened above 1.2850 in anticipation of UK Retail Sales data. The stronger-than-expected recovery in US Retail Sales has eased concerns over a potential US recession crisis. Positive key economic data released last week, including UK GDP and Retail Sales figures, demonstrate the sheer strength of GBP against the US Dollar. The GBP/USD pair remains cautious, aligning with potential rate cuts by the Fed and BoE.

Impact on GBP/JPY?

GBP/JPY declined, reacting to a boosted Japanese Yen (JPY), buoyed by growth in Japan’s second-quarter GDP and a speculated near-term interest rate rise by the Bank of Japan (BoJ). Amid political uncertainty in Japan, the Japanese Yen may fluctuate despite positive economic indicators. The GBP/JPY cross could shift as the Pound stabilises following positive economic data from the UK.?

Economic Indicator: Retail Sales (MoM)

Retail Sales, a key economic indicator, measures the total sales of goods (durable and nondurable goods, food, and retail items) and services within a specific region or country over a specified period. Strong Retail Sales Figures indicate economic health, as consumer spending comprises a large share of economic activity. Strong or weak retail sales data can impact financial markets by influencing investor perceptions about the state of the economy.

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