EUR/Pound Stabilizes Amid Eurozone Growth Concerns and UK Retail Weakness

EUR/GBP stabilizes near 0.8680 as traders reassess Eurozone’s tepid expansion and the UK’s disappointing retail performance. The currency pair rebounds from two consecutive losing sessions, with technical support establishing at 0.8650. Eurozone Q2 GDP growth remains subdued at 0.1% QoQ and 1.5% YoY, while UK July Retail Sales show mixed signals.

The Euro steadies against the Pound on Friday’s European trading session, with the EUR/Pound cross hovering around 0.8680. After a challenging mid-week period, the pair finds footing as markets digest a complex economic backdrop combining weak Eurozone growth momentum with lackluster UK consumer spending data.

Economic Data Weighs on Both Sides

Eurostat’s final Q2 release paints a picture of stalled momentum in the Eurozone. The bloc’s GDP expanded by 0.1% on a quarterly basis—matching expectations exactly—while year-on-year growth ticked up marginally to 1.5% from the prior 1.4%. Employment figures similarly reflect sluggish momentum, with quarterly growth at 0.1% and annual gains slowing to 0.6% from 0.7%.

The slowdown reflects lingering trade tensions and business caution regarding potential US tariffs. After benefiting from front-loading in Q1, the region has retreated to a cautious posture.

Across the Channel, the UK’s July Retail Sales delivery proved decidedly mixed. Headline monthly sales exceeded expectations, climbing 0.6% versus the 0.2% forecast, yet the prior month’s reading was revised sharply downward to 0.3% from 0.9%—a notable disappointment. Year-on-year growth disappointed at 1.1%, missing the 1.3% consensus and revised lower from 0.9% previously.

Excluding fuel, monthly sales advanced 0.5%, slightly above the 0.4% projection but trailing the 0.6% prior reading. Annual ex-fuel growth held firm at 1.3%, though this pales against earlier estimates of 1.8%. The downward revisions signal consumers remain cautious despite headline resilience.

Technical Landscape: EUR/Pound Eyes Higher Ground

UBS strategists maintain a constructive outlook for Euro strength relative to the Pound. The bank targets EUR/Pound reaching 0.8800 by year-end, supported by Sterling’s structural headwinds stemming from fiscal uncertainties.

Near-term technical levels prove critical for price direction. Support sits at 0.8650—a level the pair must defend to maintain upward bias. Secondary support lies at 0.8620 should that level fail. Resistance emerges around 0.8700, and a decisive break would accelerate momentum toward the 0.8750-0.8800 resistance zone.

A failure to hold 0.8650 would trigger a corrective pullback, signaling renewed weakness in the Euro relative to the Pound.

Market Backdrop: Sterling Under Pressure

The Pound struggles to find sustained momentum after a turbulent week in UK gilt markets. Long-dated yields briefly spiked to their highest levels since the late 1990s, reigniting concerns about debt sustainability before retreating. This volatility underscores the structural challenges facing Sterling.

The broader currency landscape reflects Euro resilience. Among major peers, the Euro showed the strongest performance against the US Dollar on the day, while maintaining upward pressure on the Pound. The currency heat map reveals mixed performances across the major currency complex, though EUR strength appears the dominant theme.

Market Conclusion

EUR/Pound stabilization above critical support suggests traders are positioning for continued Euro appreciation against the Pound. As long as Eurozone uncertainty doesn’t deteriorate further and UK fiscal concerns persist, the technical setup favors higher levels in this currency pair.