The EUR/GBP currency pair has gained positive momentum for the second consecutive day, reaching a four-day high of around 0.8840-0.8845 in the first half of the European session. The pound sterling’s relative underperformance follows disappointing UK retail sales figures and mixed purchasing managers’ index (PMI) prints. Although the PMI data showed a slightly better picture for the Eurozone economy, the Bank of England’s (BoE) potential interest rate hike may hold back any further gains for the EUR/GBP cross.
Key Takeaways:
✅ EUR/GBP currency pair gains traction for second consecutive day, hitting a four-day high.
✅ UK Retail Sales figures for March disappoint, causing British Pound to underperform.
✅ Mixed PMI prints from Eurozone and UK fail to provide any meaningful impetus.
✅ Bank of England rate hike expectations rise, potentially capping any further gains.
✅ Eurozone PMI data remains fairly strong, allowing European Central Bank to push forward with policy tightening.
EUR/GBP Climbs Higher:
The EUR/GBP cross continued its upward climb, gaining positive traction for the second day in a row. This comes after the currency pair had touched a four-day high near the mid-0.8800s post-Eurozone/UK PMIs. The GBP’s poor performance on Friday was due to the release of the UK monthly retail sales figures and mixed UK PMI prints.
UK Retail Sales Data Weighs on GBP:
The UK Office for National Statistics reported that domestic retail sales contracted by 0.9% in March, missing consensus estimates. Sales excluding fuel dropped by 1% during the reported month, adding to the dismal data. The disappointing retail sales figures weighed on the GBP and acted as a tailwind for the cross.
Mixed PMI Prints Fail to Provide Impetus:
The mixed PMI prints from both the Eurozone and the UK failed to provide any meaningful impetus for the currency pair. The flash UK manufacturing PMI delivered a negative surprise and dropped further into contraction territory, to 46.6 in April. However, the better-than-expected services PMI, which rose to 54.9 in April, did not impress GBP bulls or hinder the intraday positive move for the EUR/GBP cross, at least for the time being.
Eurozone PMI Print Holds up Fairly:
The shared currency, on the other hand, reacted little to the preliminary Eurozone PMI print. The data indicated that the Eurozone economy is holding up fairly, allowing the European Central Bank to push forward with its policy tightening. This is seen as another factor pushing the EUR/GBP cross higher and remains supportive of the move up.
Potential Interest Rate Hike by BoE May Hold Back EUR/GBP:
Despite the EUR/GBP cross’s upward momentum, rising bets for an additional interest rate hike by the BoE may hold back traders from placing aggressive bullish bets around the currency pair. The markets now see over a 90% chance of a 25-basis-point rate hike in May, with the bets lifted by the stronger UK consumer inflation figures released on Thursday. This could cap any further gains for the currency pair.
Frequently Asked Questions
PMI prints are Purchasing Managers’ Index surveys that provide insights into the economic health of the manufacturing and services sectors.
The UK retail sales figures disappointed due to a contraction in domestic retail sales in March and sales excluding fuel dropping by 1% during the reported month, both missing consensus estimates.
Rising bets for an additional interest rate hike by the Bank of England (BoE) might hold back traders from placing aggressive bullish bets around the EUR/GBP cross.
The preliminary Eurozone PMI print indicates that the Eurozone economy is holding up fairly, which should allow the European Central Bank to push forward with its policy tightening, seen as another factor pushing the EUR/GBP cross higher.
