EUR/GBP Soars to 0.8450 as UK Retail Sales Disappoint

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The EUR/GBP pair extended its upward movement to around 0.8450 during early European trading on Friday, as the British Pound (GBP) weakened following disappointing UK Retail Sales data for December.

The market's focus will now shift to upcoming Eurozone data, including the Current Account and Harmonized Index of Consumer Prices (HICP) set for release later on Friday.

The UK Retail Sales data, published by the Office for National Statistics, showed an unexpected 0.3% month-on-month decline in December, following a 0.2% increase in November.

Market expectations were for a 0.4% rise. On an annual basis, UK Retail Sales grew by 3.6%, below November's revised 0% and the consensus forecast of 4.2%. The weaker-than-expected data prompted some selling pressure on the GBP.

Meanwhile, with inflation showing signs of cooling, the Bank of England (BoE) has room to further ease monetary policy to support economic activity. BoE policymaker Alan Taylor remarked on Wednesday that while inflation is nearing its end, the weakening economy calls for bringing interest rates back to more normal levels for a soft landing.

The market is pricing in nearly a 90% chance of a 25 basis point cut at the BoE's February meeting, with the expectation of a total 50 basis points in rate cuts over the next year, though some now anticipate a more aggressive 75 basis points.

On the Eurozone front, the European Central Bank's (ECB) meeting minutes from December indicated that policymakers favored a cautious and gradual approach to rate cuts but acknowledged that further reductions were likely due to easing price pressures.

Paraphrasing text from "Reuters" all rights reserved by the original author.