EUR/GBP moves above 0.8700 following UK Retail Sales, German PPI data

• EUR/GBP appreciates following stronger-than-expected UK Retail Sales data on Friday.
• UK Retail Sales climbed 0.5% MoM in August, exceeding the expected 0.4% increase.
• German Producer Price Index declined 0.5% MoM, while the annual PPI fell 2.2% in August.

EUR/GBP extends its gains for the second consecutive day, trading around 0.8710 during the Asian hours on Friday. The currency cross rises as the Pound Sterling (GBP) gains ground following the release of upbeat United Kingdom (UK) Retail Sales and disappointing German Producer Price Index (PPI) data for August.

UK Retail Sales rose 0.5% month-over-month (MoM) in August, exceeding the market consensus of a 0.4% increase. The previous reading was revised to 0.5% from 0.6%. On an annualized basis, Retail Sales increased 0.7% during the reported month, against the 0.6% expected and 0.8% (revised down from 1.1%) prior.

Meanwhile, Core Retail Sales, stripping the basket of motor fuel sales, climbed by 0.8% MoM and by 1.2% year-over-year (YoY), exceeding market expectations of 0.3% and 0.8%, respectively.

The EUR/GBP pair also draws support as the Pound Sterling (GBP) faces challenges after the Bank of England (BoE) decided to keep interest rates steady at 4%, as expected, with a 7-2 majority. BoE Monetary Policy Committee (MPC) members Swati Dhingra and Alan Taylor supported further monetary policy expansion, while the rest voted to maintain the status quo.

German Producer Price Index declined by 0.5% month-over-month in August, exceeding the market expectations and the previous 0.1% decline. Meanwhile, the annual PPI fell by 2.2%, following a 1.5% decline prior. Market expectations were seen to 1.8% decline.

The EUR/GBP pair may regain its ground as the Euro (EUR) could draw support amid increasing odds of the European Central Bank (ECB) ending rate rate-cutting cycle following the latest inflation figures.

ECB Vice President Luis de Guindos said that the central bank should follow a "very prudent" approach given the high uncertainty. Guindos added that the current rate is appropriate given inflation trends and the transmission of monetary policy.