EUR/GBP

The EUR/GBP broke from its two-day losing streak after mixed UK Retail sales data. The pair was trading at 0.85589

EUR/GBP Outlook

Eurozone’s Inflation Concerns

The EUR/GBP inched lower on Thursday after the European Central Bank (ECB) released their monetary policy statement. According to data released on Thursday, the ECB maintained its interest rates. According to the Governing Council, the key ECB interest rates will remain unchanged until inflation hits the 2% target.

The net purchases under the APP will continue at a monthly pace of €20 billion. The Governing Council expects the monthly net purchases to remain unchanged until it starts raising its the key ECB rates. It also stated that it would maintain favorable liquidity conditions.

The Governing Council continue with its €150 billion net asset purchases under the PEPP until the end of March 2022. The ECB vowed to maintain an accommodative monetary policy stance to meet its inflation target.

ECB forecasts a headline inflation of 1.9% at the end of 2021. However, the central bank expects the inflation to decline to 1.5% and 1.4% in 2022 and 2023, respectively. The ECB dovish tone towards its monetary policy calmed market fears.

UK Economic Stance

The EUR/GBP pair remained unchanged after mixed UK Retail sales data. The monthly retail sales volume for June came in higher at 0.5% while the yearly sales advanced 9.7%.

Food stores were the largest contributors to the monthly increase in June 2021. Sales volume in food stores jumped 4.2%. Non-food stores slipped 1.7% in sales volume in the same month compared to May 2021. This was driven by falls in household goods stores.

Automotive fuel sales increased by 2.3% as people increased the amount of traveling. The volume of sales for the three months to June 2021 increased 12.2% and was boosted by the strong sales in April.

The monthly core retail sales for June 2021 came in lower at 0.3%. The yearly core retail sales came in at 7.4% which was weaker than the estimated forecast.

UK’s manufacturing and services Purchasing Managers Index (PMI) will be released later in the day. The manufacturing PMI is expected to come in lower at 62.7 while the services PMI is expected to decline to 62.0.

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