Ella 
EUR/GBP continues to rise following weak UK retail sales data for September from the Office for National Statistics (ONS). The pair moved higher near five-month highs of 0.8740 during the European session on Friday.
Monthly retail sales fell 0.9%, contrary to expectations for a 0.1% decline. It rose slightly by 0.4% in August. On an annual basis, sales shrank 1.0%, defying expectations for a stagnant performance.
The decline in retail sales points to the economic pressure on households from high inflation and rising borrowing costs. A sharp decline in consumer spending could have a significant impact on consumers’ inflation expectations. Due to weakening consumption, there is speculation that the Bank of England (BOE) may prefer to maintain interest rates at the current 5.25% level at its policy meeting in November.
At the same time, financial market participants are pondering the possibility of the European Central Bank (ECB) halting policy measures despite inflation exceeding the bank’s target and growing concerns about the risk of an economic slowdown or stagflation in the European region.
European Central Bank (ECB) President Christine Lagarde noted in a statement on Wednesday that underlying inflation remains strong and wage growth continues to remain historically high. These factors have contributed to continued gains in the euro’s performance against the pound.
The German Producer Price Index (PPI) showed a decline in primary market prices. The monthly data showed a 0.2% decline, a far cry from expectations for a 0.4% rise in September. The year-on-year decline was larger at 14.7%, beating market expectations of 14.2%.
