EUR/GBP holds losses near 0.8400 following German Retail Sales, eyes on CPI data

• EUR/GBP remains subdued following mixed German Retail Sales data released on Friday.
• The Euro could regain its ground as trade tension eases between the United States and the European Union.
• The GBP receives support after the IMF raised the UK GDP growth forecast for the current year to 1.2% from 1.1%.

EUR/GBP edges lower after registering more than 0.50% gains in the previous session, trading around 0.8420 during the Asian hours on Friday. The currency cross holds losses following the release of Germany’s Retail Sales data. Traders shift their focus to Consumer Price Index (CPI) data due later in the day.

German Retail Sales grew by 2.3% year-over-year in April, surpassing the expected 1.8% increase. The previous growth was at 3.3% (revised from a 2.2% rise). However, the monthly data showed a decline of 1.1% in April, against the expected 0.2% and the previous 0.9% gains.

However, the EUR/GBP cross surged as the Euro (EUR) received support from easing trade tension between the United States (US) and the European Union (EU). President Trump delayed the tariff deadline on imports from the EU from June 1 to July 9. Meanwhile, the Brussels also agreed to accelerate trade talks with the United States to avoid a transatlantic trade war.

On Wednesday, European Central Bank (ECB) Governing Council member Klaas Knot said that the current European inflation outlook is murky, challenging the central bank to engage in direct moves. On Tuesday, ECB policymaker François Villeroy de Galhau noted that the “policy normalization in the Euro area is probably not complete.”

The EUR/GBP cross faces downward pressure as the Pound Sterling (GBP) attracts buyers following the International Monetary Fund (IMF) raising the United Kingdom (UK) Gross Domestic Product (GDP) growth forecast for the current year to 1.2% from 1.1%.

The British Pound also draws support from fading market expectations of the Bank of England (BoE) reducing interest rates again in the June policy meeting. The dovish bets weaken surrounding the Bank of England’s (BoE) policy outlook following hotter-than-expected UK Consumer Price Index (CPI) and a robust growth in the UK Retail Sales data for April.