EUR/GBP steadies above 0.8750 ahead of German Retail Sales data

EUR/GBP may rise as the Euro could gain on ECB caution over elevated inflation perceptions and wage pressures.
ECB President Christine Lagarde said Eurozone inflation should stabilize at the 2% target over the medium term.
The Pound Sterling weakens on rising BoE rate cut expectations after soft jobs data and easing inflation.

Akhtar Faruqui FXStreet

EUR/GBP moves sideways after two days of gains, trading around 0.8770 during the Asian hours on Monday. However, the currency cross may advance as the Euro (EUR) could draw support from the European Central Bank’s (ECB) cautious stance, amid elevated consumer inflation perceptions and potential wage-driven price pressures. German Retail Sales data for January will be eyed later in the day.

European Central Bank (ECB) President Christine Lagarde said last week that Eurozone inflation is projected to stabilize at the 2% target over the medium term, adding that disinflation efforts have been effective. Lagarde noted that economic activity should be supported by rising labor income in a resilient job market, along with increased investment in defense, infrastructure, and digital technologies.

The EUR/GBP cross may further gain ground as the Pound Sterling (GBP) struggles with the increasing likelihood of interest rate cuts by the Bank of England (BoE), following weaker employment data and continued easing of inflationary pressures.

The British Pound faces added pressure after Labor’s by-election defeat in Gorton and Denton cast doubt on Prime Minister Keir Starmer’s leadership. The loss has intensified criticism from Labor MPs ahead of the May elections in Scotland, Wales, and several English councils, widely viewed as a key test of his premiership.

Economic Indicator

Retail Sales (YoY)

The Retail Sales released by the Statistisches Bundesamt Deutschland is a measure of changes in sales of the German retail sector. It shows the performance of the retail sector in the short term. Percent changes reflect the rate of changes of such sales.The changes are widely followed as an indicator of consumer spending. The positive economic growth anticipates "Bullish" for the EUR, while a low reading is seen as negative, or bearish, for the EUR.

EUR/USD appears supported by the 200-day SMA, for now

Following an early pullback to multi-week lows near 1.1670, EUR/USD now manages to reclaim the 1.1700 region as the NA session draws to a close on Monday. The steep retracement in spot follows the equally strong move higher in the US Dollar, as investors continue to assess the geopolitical landscape in the wake of the US and Israel attacks on Iran.

GBP/USD hits new yearly lows near 1.3300

GBP/USD adds to the recent bearish tone, approaching to the key 1.3300 support to reach fresh YTD troughs against the backdrop of the robust performance of the US Dollar. Indeed, Cable’s decline comes amid the firm demand for the safe-haven space in the wake of the US and Israel attacks to Iran.

Gold clings to gains as US-Iran conflict continues to underpin safe-haven assets

Gold retains positive bias for the fifth consecutive day on Tuesday as rising geopolitical tensions in the Middle East continue to underpin safe-haven assets. However, a bullish US Dollar could keep the bullion below its highest level since late January, set on Monday, warranting caution before positioning for any further appreciation.