Soft German Retail Sales weigh on Euro against British Pound as traders await BoE rate decision

• 0.8345 is in focus as EUR/GBP edges lower in early European trading on Tuesday.
• Thursday’s November policy meeting is set to bring an interest rate increase from the BoE.
• A surprise 2.0% MoM decline marked September’s German Retail Sales.

0.8345 is the level around which EUR/GBP is posting modest losses. The cross is lower in Tuesday’s early European session as hawkish expectations for Bank of England (BoE) rates lift the British Pound (GBP) against the Euro (EUR).

Economists surveyed by Reuters expect the BoE to lift Bank Rate from 3.75% to 4.0% at Thursday’s November policy meeting. Such a move would mark the first increase since August 2023, when inflation remained above the BoE’s 2% target.

For further direction, traders will look to the press conference held by BoE Governor Andrew Bailey. Hawkish remarks from the central bank’s policymakers could give the British Pound (GBP) a near-term lift.

Alexander Harvey, UK economist at consultancy Oxford Economics, said: "While we don't expect a clear steer from the Committee on how many hikes they're planning, it's possible that the meeting minutes or Bailey ... signal that Bank Rate is unlikely to reach the level that is priced in by financial markets,"

September’s German Retail Sales dropped 2.0% MoM, reversing the previous 1.2% increase and falling short of the market’s forecast for 0.4% growth. The weaker-than-expected release could put pressure on the EUR. On an annualised basis, September Retail Sales stood at -2.3%, following a 0.3% decline in August.

25bps BoE hike expected; guidance may restrain Pound gains

A new tightening cycle is widely expected to begin on Thursday, according to strategists at Brown Brothers Harriman, who highlight the forthcoming “Bank of England (BoE) policy decision and Monetary Policy Report (MPR)”. They describe the BoE as “widely expected to start tightening with a 25bps hike to 4.00% after standing pat all year.” The strategists say “firmer UK inflation and economic activity back the move,” and expect the vote to be split “7-2 with doves Alan Taylor and Swati Dhingra supporting a hold.”

The scope for lasting Pound gains may nevertheless depend on the Bank’s projections. BBH warns that “BoE guidance and the updated MPR will test market expectations for 100bps of tightening over the next twelve months.” The strategists argue that “persistent spare capacity across the forecast horizon would strengthen the case for pricing out hikes and limit GBP upside,” implying that a hawkish policy turn alone may not deliver sustained currency strength if the forecasts remain subdued.

7.4 Speechtracker score: BoE’s Greene keeps GBP rate hike risks in focus

A score of 7.4 on FXS Speechtracker puts BoE’s Greene speech exactly at Greene’s historical average. Its focus on stalled wage disinflation and increased second-round risks nevertheless signals a distinctly hawkish tilt. Greene highlights pay growth nearer 3.5%, wage disinflation stalled above levels compatible with 2% inflation, and unexpectedly resilient economic activity. Together, these points suggest little appetite for rapid rate cuts and favour a firmer GBP.

Greene’s observation that labour market slack may have peaked adds weight to the possibility of persistent underlying inflation pressures. It also supports Greene’s call for pre-emptive action against second-round effects. The overall message of sticky wage dynamics and resilient demand supports GBP yields and leaves upside risks for the currency in place.

22.7 RSI: EUR/GBP technical outlook stays bearish despite oversold conditions

Trading below both the 20-period Bollinger middle band and the 100-day moving average, EUR/GBP remains firmly under bearish pressure on the daily chart. A dense cluster of overhead resistance continues to constrain rallies. At around 22.7, the Relative Strength Index (14) sits deep in oversold territory. Downward momentum therefore remains strong, but short-covering rebounds are possible; a sustained recovery would require the cross to regain key resistance.

Immediate support lies at approximately 0.8310, the lower Bollinger band. A decisive breach would leave the downtrend room to extend towards fresh lows. For any rebound, the Bollinger middle band near 0.8405 provides initial resistance, ahead of the upper band around 0.8500. The 100-day moving average at 0.8535 presents a more substantial obstacle to a corrective advance.

(The technical analysis of this story was written with the help of an AI tool. Know more.)