Euro dips further against British Pound as German Retail Sales disappoint

• EUR/GBP hits a fresh two-week low below 0.8560 and is down 0.4% so far this week.
• German Retail Sales fell for the second consecutive month in August, though less than in July.
• UK GDP has been revised up, while the Current Account deficit narrowed unexpectedly in Q2.

The Euro (EUR) extends losses for the fourth consecutive day against the British Pound (GBP) on Wednesday, as German retail consumption figures failed to cheer investors while the UK Q2 Gross Domestic Product (GDP) was revised higher. The EUR/GBP pair has reached fresh two-week lows below 0.8560, accumulating a 0.4% decline so far this week.

Data from Germany released on Wednesday showed that Retail Sales contracted 0.4% in August, after a 2.5% fall in July, while the year-on-year (Y-o-Y) reading showed a 1.3% rebound after dropping 3.4% in the previous month, but still falling short of the 2% gain anticipated by the market. 

In the UK, the second quarter’s GDP has been revised to 0.5% growth from previous estimates of 0.4%, and the Y-o-Y reading to 1.4% from the 1.2% previously released. Beyond that, data from the UK National Statistics Office revealed that the Current Account deficit narrowed to GBP 19.932 billion in Q2 from a downwardly revised GBP 21.12 billion in Q1, against market expectations of a widening shortfall to GBP 25.6 billion.

High Oil Prices and France’s debt keep weighing on the Euro 

The pair has been on the defensive over the last few weeks, weighed by higher Oil prices and growing concerns about France’s public debt. Brent Oil has retreated below $96.00 from Tuesday’s highs above $101.00, providing some relief to the Eurozone’s oil-importing economies, but concerns about France’s borrowing costs remain a key hurdle for any significant Euro appreciation.

French public debt pile grew to EUR 3,596 trillion in June, reaching 119% of its Gross Domestic Product (GDP), its highest level since 1946. The gridlock in the government is ruling out any convincing savings plan, and the gap between the French and the German debt yield has jumped to 115 basis points, the largest since 2012, triggering fears about another credit crisis in the Euro Area.