Euro trims losses against British Pound despite bright UK Retail Sales data

EUR/GBP edges up from session lows near 0.8660 following ther release of UK data.
UK Retail Sales increased well beyond expectations in May.
Public Sector Net Borrowing has also risen against expectations, which might dent the Pound's recovery.

Guillermo Alcala FXStreet

The Euro (EUR) is trimming some losses against the British Pound (GBP) on Friday, with the EUR/GBP pair trading at 0.8670 after bouncing from session lows near 0.8660. UK Retail Sales figures beat expectations in May, but the unexpected rise in government borrowing may have offset the positive impact on GBP.

Retail consumption increased by 1.2% in the UK in May, according to data released by the Office for National Statistics, more than twice the 0.5% expected and following a 1% decline in April. Excluding fuel purchases, sales of all other products also increased by 1.2% after a 0.1% contraction in the previous month.

At the same time, National Statistics also revealed that Public Sector Net Borrowing rose to GBP 23.29 billion in May, from GBP 23.03 billion in April, against expectations of a decline to GBP 18.5 billion. These figures might increase concerns about the UK’s fiscal deficit and dent the Pound’s recovery.

German producer prices slow down in May

In the Eurozone, German Producer Prices Index (PPI) data showed that factory-gate inflation accelerated to 2.2% year-on-year in May, up from 1.7% in April, but below the 2.5% rate expected. The Monthly PPI eased to 0.3% from 1.2% in the previous month.

On Thursday, the Bank of England (BoE) met market expectations and left interest rates on hold at 3.75, with two policymakers calling for a quarter-point rate hike. The central bank also lowered its inflation forecasts for the rest of the year, but warned that the impact of the energy shock on the UK economy remains uncertain.

Also on Thursday, the Labour Mayor of Manchester, Andrew Burnham, won the election in Makerfield, securing the parliamentary seat needed to challenge the Prime Minister, Keir Starmer. The compact on the Pound, however, has been marginal so far.

Economic Indicator

Retail Sales (MoM)

The Retail Sales data, released by the Office for National Statistics on a monthly basis, measures the volume of sales of goods by retailers in Great Britain directly to end customers. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales volumes in the reference month with the previous month. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Economic Indicator

Retail Sales ex-Fuel (MoM)

The Retail Sales ex-fuel data, released by the Office for National Statistics on a monthly basis, measures the volume of sales of goods by retailers in Great Britain directly to end customers excluding automotive fuel. Changes in Retail Sales are widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales volumes in the reference month with the previous month. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

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