• EUR/GBP peaked at a daily high at the 100-day SMA at 0.8700 and then closed at 0.8650.
• British and German yields rose on Thursday, but 2-year yield differentials favour the Euro.
• Consumer Confidence in the EU dropped but was lower than expected.
• All eyes are now on British Retail Sales on Friday’s session.

The EUR/GBP reversed its course during the American Session after getting rejected at the 100-day Simple Moving Average at 0.8700 and closed at 0.8650. European data was released with Consumer Confidence dropping in July but lower than expectations, while the German Producer Price Index (PPI) declined 0.3% in June, and the annualised measure dropped to 0.1%.

Regarding the next ECB decision, tightening expectations remain steady. Markets discount a 25 basis point (bps) hike next week, then bet on nearly 60% odds of a similar hike in September and is priced mainly for the December meeting. In the meantime, German yields saw significant increases on Thursday, with the 2, 5 and 10-year rates displaying more than 2% increases.

On the other hand, the GBP continues struggling to find demand following soft inflation figures reported on Wednesday. On Friday, Retail Sales from June in the UK will be reported, and they are expected to have increased by 0.2% and decelerated from their previous figure of 0.3%. They will give a more precise outlook on the British economic situation to model their expectations regarding the Bank of England’s next steps. As for now, the odds of 50 basis points (bps) have fallen to nearly 45% for the next meeting in August, and investors are seeing a terminal rate of 5.75%