Euro retreats from weekly highs against British Pound as UK data beats expectations

On Friday, the UK released economic data that showed GDP growth of 0.4% in July, surpassing expectations of no growth and following a 0.3% increase in June. Industrial Production rose 0.2% compared to June's decline, while Manufacturing Production hit its strongest growth in four months at 0.9%, beating forecasts of a 0.2% increase.

The UK Index of Services, which tracks output and value-added growth in the services sector, climbed 0.6% in the three months to July, exceeding the 0.5% expectation. The Goods Trade Balance deficit narrowed to £20.96 billion from £23.00 billion in June, also beating expectations of a £22.3 billion shortfall.

Meanwhile, the European Central Bank (ECB) maintained its benchmark Rate at 2.5% for the second straight time, meeting market expectations, amid rising consumer price pressures from higher energy costs. ECB President Christine Lagarde warned that the energy shock caused by the Middle East conflict will persist "well into 2027" and that consumer inflation will only revert to the 2% level by the end of next year.

This suggests the central bank may need to raise rates at least once more within the next 12 months, providing some support for the Euro.

In contrast, the Bank of England (BoE) is likely to keep rates unchanged after their next monetary policy meeting. Analysts from Rabobank noted that, despite a more hawkish voting pattern from some committee members during the July 30 policy meeting, there is still a high bar for dovish members to vote in favor of tightening policy.