The British Pound (GBP) outperformed the Euro (EUR) on Friday, with the EUR/GBP currency pair trading near more than one-week lows around 0.8635, despite the release of weaker-than-expected UK Retail Sales data [1]. UK Retail Sales fell by 1.3% month-on-month in April, following a 0.6% increase in March, and marking a steeper decline than the 0.6% drop anticipated by markets. On an annual basis, Retail Sales growth slowed to 0% from 1.4% previously, missing forecasts for a 1.3% increase [1].
In contrast, German economic data released on the same day was more positive. The IFO Business Climate Index rose to 84.9 in May from 84.5 in April, surpassing market expectations of 84.2 and indicating improving business sentiment in Germany, the Eurozone's largest economy. The IFO Current Assessment gauge increased to 86.1 from 85.4, while the Expectations Index edged up to 83.8 from 83.5. Additionally, the GfK Consumer Confidence survey for June improved to -29.8 from -33.1 in the previous month. Germany's final Q1 Gross Domestic Product (GDP) reading confirmed the economy expanded by 0.3% quarter-on-quarter and 0.4% year-on-year [1].
Despite these positive German data points, the Euro remained under pressure. Rising energy prices, linked to ongoing Middle East tensions, continued to fuel concerns over the Eurozone's reliance on imported energy. Earlier in the week, data showed accelerating inflation pressures across the bloc and a sharp weakening in business activity, reinforcing fears of slower economic growth [1].
The Euro also struggled after cautious remarks from European Central Bank (ECB) President Christine Lagarde, who reiterated that policymakers would continue to follow a "data-dependent, meeting-by-meeting approach." Lagarde stated that long-term inflation expectations remain broadly well anchored and emphasized that the ECB would take necessary measures to maintain price stability at its 2% target [1].
CONCLUSION
Despite weak UK Retail Sales data, the British Pound outperformed the Euro, which remained pressured by energy concerns and cautious ECB commentary. Positive German sentiment and GDP data failed to lift the Euro, highlighting ongoing market concerns about the Eurozone's economic outlook.