The EUR/GBP cross has gained momentum for two consecutive days, reaching a four-day high of around 0.8840-0.8845 during the first half of the European session on Friday.
The British Pound’s lackluster performance on the final day of the week was due to disappointing UK monthly retail sales figures and mixed UK PMI prints. The UK Office for National Statistics reported a contraction in domestic retail sales by 0.9% in March, with sales excluding fuel dropping by 1%, both of which fell below consensus estimates.
In addition, the flash UK Manufacturing PMI surprised negatively, dropping further into contraction territory to 46.6 in April. This weaker reading was offset to some extent by the better-than-expected Services PMI, which rose to 54.9 in April. However, this failed to impress GBP bulls or impede the intraday positive move for the EUR/GBP cross.
On the other hand, the shared currency had a minimal reaction to the preliminary Eurozone PMI print. The data indicated that the Eurozone economy is holding up fairly well, which should allow the European Central Bank to continue with its policy tightening, supporting the EUR/GBP cross’s upward trend.
However, traders might be cautious about placing aggressive bullish bets around the EUR/GBP cross due to increasing expectations for an additional interest rate hike by the Bank of England (BoE). The markets now see over a 90% chance of a 25-bps rate hike in May, supported by the stronger UK consumer inflation figures released on Thursday. This could limit any further gains for the EUR/GBP cross.
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