EUR/GBP drifts further, approaching 0.8700 amid a firm Pound

• The Euro approaches 0.8700 after peaking above 0.8740 last week.
• Strong UK macroeconomic data and dwindling hopes of BoR cuts are supporting the Pound.
• The impact of the upbeat German Ifo Business Climate Index on the pair has been minimal.

The Euro is pulling back from Friday's gains, right above 0.8740, reaching session lows below 0.8720. The upbeat German Sentiment Index has failed to provide any significant support for the pair, as the Pound continues to draw support from the strong UK data released on Friday.

UK retail consumption figures beat expectations in September, with a 0.5% growth, following an upwardly revised 0.6% increase in August, against the market consensus, which had anticipated a 0.2% decline.

Strong UK data dampens hopes of BoE rate cuts

Beyond that, preliminary PMI services showed a substantial improvement in business activity. Services activity accelerated to 51.1. from 50.80 in September, beating expectations of a 51.0 reading, while the Manufacturing PMI jumped to 49.6 from 46.2 in September, reaching its highest reading in the last 12 months.

These data support the hawkish stance of the Bank of England and dampen hopes that the monetary policy committee might cut interest rates further, at least until the first quarter of 2026, which has provided a fresh boost to the GBP.

On Monday, the German Ifo Business Climate Index improved to 88.4 from last month's 87.7, beating expectations of an uptick to 87.8, which has provided some moderate impetus for the Euro. The Economic Expectations Index has jumped to its highest level in more than three years, at 91.6, although sentiment about current economic conditions has deteriorated to 85.5 from 85.7, limiting the positive impact on the Euro.