EUR/GBP steadies above 0.8750 ahead of German Retail Sales data

• EUR/GBP may rise as the Euro could gain on ECB caution over elevated inflation perceptions and wage pressures.
• ECB President Christine Lagarde said Eurozone inflation should stabilize at the 2% target over the medium term.
• The Pound Sterling weakens on rising BoE rate cut expectations after soft jobs data and easing inflation.

EUR/GBP moves sideways after two days of gains, trading around 0.8770 during the Asian hours on Monday. However, the currency cross may advance as the Euro (EUR) could draw support from the European Central Bank’s (ECB) cautious stance, amid elevated consumer inflation perceptions and potential wage-driven price pressures. German Retail Sales data for January will be eyed later in the day.

European Central Bank (ECB) President Christine Lagarde said last week that Eurozone inflation is projected to stabilize at the 2% target over the medium term, adding that disinflation efforts have been effective. Lagarde noted that economic activity should be supported by rising labor income in a resilient job market, along with increased investment in defense, infrastructure, and digital technologies.

The EUR/GBP cross may further gain ground as the Pound Sterling (GBP) struggles with the increasing likelihood of interest rate cuts by the Bank of England (BoE), following weaker employment data and continued easing of inflationary pressures.

The British Pound faces added pressure after Labor’s by-election defeat in Gorton and Denton cast doubt on Prime Minister Keir Starmer’s leadership. The loss has intensified criticism from Labor MPs ahead of the May elections in Scotland, Wales, and several English councils, widely viewed as a key test of his premiership.