EUR/GBP gains ground above 0.8650 ahead of Eurozone Retail Sales release

• EUR/GBP gathers strength to near 0.8680 in Thursday's early European session. 
• Economists anticipate the ECB will leave the deposit rate unchanged in the September meeting. 
• UK Finance Minister denies UK economy is broken, pledges tight spending. 

The EUR/GBP cross gains traction to around 0.8680 during the early European session on Thursday. The Euro (EUR) strengthens against the Pound Sterling (GBP) as market bets that interest rates will remain unchanged in the near term. The Eurozone Retail Sales will take center stage later on Thursday. 

Eurozone inflation rose in August, staying close to the European Central Bank's (ECB) 2% target and likely firming up market bets that interest rates will remain steady in the near term, even if the rate cut debate could still simmer. ECB board member Isabel Schnabel said earlier Tuesday that the interest rates are already mildly accommodative, adding that she does not see a reason for a further rate cut. 

Traders will take more cues from the Eurozone Retail Sales, which is expected to show a rise of 2.4% year-over-year in July. The attention will shift to the Eurozone Gross Domestic Product (GDP) for the second quarter (Q2) later on Friday for fresh impetus. 

The UK markets suffered a fresh sell-off on Tuesday, with the UK government's long-term borrowing costs reaching their highest level since 1998, which exerted some selling pressure on the GBP. Nonetheless, the Pound Sterling finds some relief after a pause in the rally in UK gilt yields and UK Finance Minister Rachel Reeves's remarks. 

Reeves said on Wednesday that she would deliver her annual budget on November 26, insisting the economy was not "broken" and that she would keep a grip on spending to help lower inflation and borrowing costs, per Reuters.