By Areena FxThe EUR/GBP pair is hovering around the 0.8550 level, with analysts at ING providing insights into its future trajectory.
Strong Rebound in UK Retail Sales
In January, UK retail sales saw a robust increase of 3.4% month-on-month, surpassing all expectations. This positive development follows softer-than-expected GDP figures released on Thursday, indicating that the British economy experienced a recession in late 2023.
The impact of activity data on the Bank of England’s (BoE) policy stance appears limited. Attention remains focused on inflation, particularly in the services sector, and wage growth. It is unlikely that the BoE will adopt a significantly more hawkish stance based solely on softer growth figures, without first obtaining assurances regarding inflation.
The Pound’s response to this narrative has been relatively modest, with only slight declines following the GDP figures on Thursday and a slight gain observed today. However, ING suggests that there is potential for stabilization, with 0.8500 potentially marking the bottom for the EUR/GBP pair. Subsequently, a rebound in EUR/GBP could occur, driven by perceived mispricing in monetary policy between the UK and the Eurozone.