EUR/GBP slides farther below 0.89 handle after stellar UK retail sales

Having faced rejection near the 0.8900 handle, the EUR/GBP cross turned lower and dropped to a session low level of 0.8826 on upbeat UK macro data.

The cross stalled its two-day recovery move from near two-month lows touched last week and came under some fresh selling pressure on Wednesday. The latest leg of sharp slide of over the past hour was solely led by stellar UK monthly retail sales figures, which surpassed even the most optimistic estimates.

The British Pound strengthened across the board after August retail sales data eased concerns that rising inflation trajectory/stagnant wage growth have take a bite out of household purchasing power. Today's data also reinforced market expectations that the BoE would eventually move towards raising interest rates, sooner rather than later. 

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Meanwhile, the prevalent bullish sentiment around the shared currency, in wake of Tuesday's upbeat German ZEW economic surveys, helped limit further losses, with the cross rebounding around 20-25 pips from session lows to currently trade around mid-0.8800s. 

Technical levels to watch

A follow through weakness has the potential to continue dragging the cross further towards the 0.8800 handle ahead of two-month lows support near the 0.8775 region. On the upside, any recovery attempts might now confront fresh supply near 0.8875 area, but the key hurdle remains near the 0.8900 handle.