EUR/GBP Consolidates Near Key Levels as Economic Data Paints Mixed Picture

EUR/GBP is consolidating around 0.8680 as traders reassess subdued Eurozone growth data and mixed UK Retail Sales figures. The Euro-to-GBP exchange rate has stabilized after a two-day pullback, with the pair now hovering near critical technical support. Market participants are currently balancing sluggish Eurozone economic expansion against a complex retail backdrop in the UK, creating a pause in recent directional momentum.

Eurozone Economy Shows Limited Expansion

Eurostat’s final reading for Q2 GDP confirmed that the Eurozone is growing at a restrained tempo. Quarter-on-quarter expansion came in at 0.1%, matching prior expectations precisely, while year-on-year growth edged up marginally to 1.5% from the previous 1.4%. The employment picture followed suit, with payroll numbers rising just 0.1% during the quarter and annual job creation moderating to 0.6% from 0.7%.

This muted performance reflects lingering caution among businesses and households. Following a first-quarter bounce driven by pre-tariff front-loading, uncertainty surrounding potential US trade policies has prompted economic actors to adopt a defensive posture, weighing on consumption and investment decisions.

UK Retail Picture Sends Mixed Signals

British retail figures for July presented a contradictory narrative. Headline sales advanced 0.6% month-on-month, surpassing the 0.2% forecast but trailing a heavily revised prior reading of 0.3% (down from an initially reported 0.9%). Year-on-year, the 1.1% increase fell short of the 1.3% consensus and decelerated from the downwardly adjusted 0.9%.

Core retail sales (excluding fuel) rose 0.5% monthly, marginally above the 0.4% estimate, though trailing the prior 0.6%. Annual core growth held steady at 1.3%, disappointing relative to the earlier 1.8% reading. The downward revisions paint a picture of short-term resilience masking longer-term softness in household spending power.

Technical Analysis Points to Further EUR Strength

From a technical perspective, UBS analysts maintain that the structural bias favours euro appreciation on the EUR to GBP pair. The 0.8650 level represents a pivotal support zone; as long as the exchange rate holds above this threshold, upside momentum remains intact. Immediate resistance sits near 0.8700, with a decisive break potentially clearing the path toward 0.8750-0.8800 by year’s end.

Conversely, a failure to defend 0.8650 would expose the pair to corrective weakness, with secondary support materializing around 0.8620. UBS’s outlook remains tilted toward euro strength, underpinned by persistent fiscal concerns weighing on Sterling sentiment.

Sterling Faces Headwinds Despite Stabilization

Sterling has regained some footing after a turbulent week dominated by gilt market volatility. Long-dated UK bond yields had climbed to their highest levels in nearly three decades, amplifying debt sustainability concerns before retreating on Friday. This volatility has kept Sterling vulnerable despite technical stabilization.

Currency Performance Snapshot

The Euro demonstrated mixed strength across major pairs today. EUR outperformed against the US Dollar (up 0.38%) while gaining just 0.09% against GBP. Meanwhile, the US Dollar weakened broadly, declining 0.38% against EUR and 0.30% against GBP. The modest EUR/GBP movement reflects the cautious tone pervading both economies, with neither currency commanding a decisive edge in the current environment.