The EUR/GBP Maintains Its Losing Streak Near 0.8650, Notwithstanding Positive German Data

The EUR/GBP pair continued their losing trend that began on Tuesday, closing the European session on Friday trading near 0.8650. On Friday, housing data from the United Kingdom (UK) that exceeded expectations may offer the GBP a small amount of support.

In September, Halifax house prices (MoM) decreased by 0.4%, which was lower than the 0.8% decline predicted by the market and the 1.8% decline reported in August.

Nevertheless, the British Pound (GBP) is currently experiencing a phase of subpar performance, predominantly due to the unanticipated determination by the Bank of England (BoE) to suspend its rate-hiking cycle in September. The divergence from the pattern noted since December 2021, during which the Bank of England chose not to increase interest rates, has brought about a complex dynamic.

The situation was further complicated when the central bank downgraded its growth projection for the period of July to September from 0.4% to a mere 0.1%. This reduction in rate significantly diminishes any indication of a desire to pursue additional increases in interest rates.

Furthermore, the cross pair was impacted by the disappointing Retail Sales data for the Eurozone on Wednesday. In contrast, monthly performance of Germany's Factory Orders was robust, which could bolster the Euro.

The data presented a positive figure of 3.9%, which deviated from the initial estimate of an 11.3% decline and came in at 1.8%. The annual performance exhibited a decline of 4.2% in comparison to the preceding decline of 10.1%.

A phase of vigilance and caution seems to have descended upon the Eurozone in relation to prospective interest rate increases initiated by the European Central Bank (ECB). In recent statements, ECB officials have adopted a measured stance, placing significant emphasis on inflation targeting.

Tuomas Valimaki, a member of the ECB Governing Council, presents a more sanguine perspective by failing to anticipate the occurrence of stagflation within the euro area. Conversely, ECB Chief Economist Philip Lane signals a more cautious posture by acknowledging that additional effort is required to achieve the inflation target.

The divergent perspectives may be indicative of the complex and precarious economic environment in the Eurozone, potentially impeding the EUR/GBP pair.