EUR/GBP jumps 30 pips to 0.8970 as UK retail sales drop to 4-year low

EUR/GBP jumped 30 pips to a fresh session high of 0.8970 after the UK Office for National Statistics (ONS) data showed UK consumers are feeling the pinch of creeping inflation.

UK retail sales dropped 0.8% m/m in September, which is way bigger than the estimated drop of 0.1%. The sharp drop pushed the annualized figure lower to 1.2%. Core retail sales (excluding fuel) dropped 0.7% m/m. Year-on-year, core sales growth slowed to 1.6%.

The dismal retail sales data could be an indication that the UK consumer is no longer resilient. The data only adds to the pressure on the Bank of England to act (hike rates). The markets have already priced-in a symbolic move in November. Most economists see little scope for further policy normalization given the Brexit uncertainty.

Meanwhile, EUR remains well bid in the face of increasing tensions in Spain. As per latest reports, the Spanish government is ready to begin the procedures provided by the article 155 of the Constitution to restore legality in Catalonia.

EUR/GBP Technical Levels

The pair clocked a high of 0.8975 and was last seen trading around 0.8970. The immediate resistance is lined up at 0.8993 9Oct 6 high), which, if breached, would expose 0.9033 (previous week's high) and 0.9049 (late Oct 2016 high). On the downside, breach of support at 0.8929 (100-DMA) would expose support at 0.8897 (previous day's low) and 0.8891 (July 27 low).