EUR/GBP falls to near 0.8650 as consumer spending improves in UK

• EUR/GBP depreciates as the Pound Sterling advances on improved UK consumer spending in August.
• Traders expect the ECB to keep rates unchanged for the second consecutive meeting on Thursday.
• Poland activated its own and NATO's air defenses to intercept drones that entered its airspace during a Russian strike on Ukraine.

EUR/GBP extends its losses for the second successive session, trading around 0.8650 during the Asian hours on Wednesday. The currency cross continues to lose ground as the Pound Sterling (GBP) gains ground after British Retail Consortium (BRC) Like-For-Like Retail Sales rose in August and marked the strongest growth in four months. However, the BRC said that the sector continues to grapple with high borrowing costs, elevated energy bills, and uncertainty surrounding the government's November budget.

Moreover, Britain's finance minister, Rachel Reeves, asked the government to support the Bank of England (BoE) efforts to lower inflation while also fostering growth. Last week, Reeves insisted the economy was not "broken" when she confirmed a November 26 date for her annual budget, per Reuters.

Traders will likely observe Thursday's meeting for further cues on the European Central Bank's (ECB) policy outlook for the rest of the year. The ECB is widely expected to keep rates unchanged for the second consecutive meeting on Thursday, supported by steady growth and inflation hovering near the target.

France's parliament toppled the government on Monday over its plans to rein in the increasing national debt. Lawmakers voted on a vote of no confidence on Prime Minister François Bayrou as parties could not agree to budget cuts, forcing President Emmanuel Macron to appoint the country's fifth PM in less than two years.

On geopolitics, Poland scrambled its own and NATO air defenses on Wednesday to intercept drones entering its airspace during a Russian strike on Ukraine. Kyiv also warned of a suspected Russian drone incursion into Polish territory, marking a breach of NATO airspace, per Reuters.