EUR/GBP tumbles to 0.8600 after surprisingly strong UK retail sales

The EUR/GBP cross turned sharply lower and dropped to session low, below 0.8600 handle, after a surprisingly stronger-than-expected UK monthly retail sales data.

Details of data released from UK showed retail sales bounce sharply in July, recording an impressive m-o-m growth of 1.4% versus expectations of a 0.1% gain. The incoming UK economic data has provided little evidence of immediate impact of the historic Brexit referendum and hence, triggered a sharp up-lift for the British Pound.

The British Pound has outperformed its European counterpart with the EUR/GBP cross correcting over 100-pips from a fresh 3-year high, beyond 0.8700 handle, touched during the early part of current trading week. 

Meanwhile, the cross had a muted reaction to the release of composite Euro-zone CPI print for the month of July, which was in-line with initial estimates.

Technical levels to watch

On a sustained weakness below 0.8600 mark, the cross seems to continue drifting lower towards testing 20-day SMA support near 0.8525-20 region. A follow through selling pressure is likely to extend the near-term corrective move towards 0.8480-75 horizontal support.

Meanwhile on the upside, 0.8640 level now seems to act as immediate resistance above which the cross to surpass 0.8675 resistance and make a fresh attempt to move back above 0.8700 handle.