GBPEUR
forecast & analysis

Underlying trend:

Bearish — ECB June hike now fully priced whilst BoE expectations have been slashed; policy divergence is the dominant driver.

Last week's key drivers:

• ECB's Schnabel stated "a rate hike in June will be needed" — overnight swaps now pricing around 70 basis points of ECB rate hikes by year end
• BoE Governor Bailey said the bank was "in no rush" to raise rates — markets now pricing just 35 basis points of BoEhikes, down from over 80 basis points previously
• The policy gap between a hawkish ECB and a cautious BoE is now the cleanest driver for this pair
• UK factory output grew at its fastest pace in four years in May — but largely driven by front-loading ahead of supply disruptions, making it unlikely to last

This week (Mon–Fri preview):

• Monday: Final eurozone and UK manufacturing PMIs — UK expected at 53.7 versus eurozone at 51.4.
• Tuesday: Eurozone CPI flash — the most important release for this pair this week. Headline expected to accelerate to 3.2% from 3.0%; core to 2.4% from 2.2%. A beat cements the ECB June hike and pushes the pair lower. Eurozone unemployment also due
• Wednesday: Final eurozone and UK services and composite PMIs — eurozone composite seen at 47.5, UK at 48.5, both in contraction.
• Thursday: UK construction PMI (40 expected);

Key risks:

• Hot eurozone CPI Tuesday — particularly a core beat above 2.4% — is the most significant near-term catalyst for the pair, cementing the ECB June hike and extending EUR strength
• Weak UK composite PMI Wednesday confirming contraction would compound the dovish BoE narrative and add further GBP pressure

Most likely direction:

Bearish. Eurozone CPI Tuesday is the key near-term trigger — a beat accelerates the move; any ECB pushback is the only meaningful upside risk for GBP

Underlying trend:

Bearish — ECB signalling a June hike whilst BoE expectations are being rapidly scaled back; the policy divergence is widening in EUR's favour.

Last week's key drivers:

• Weak UK data sweep — jobs, inflation, retail sales and PMIs all missed forecasts — triggering a sharp dovish repricing of BoE expectations
• Markets now pricing just one quarter-point BoE hike in 2026 with only a 60% chance of a second, down from two hikes fully priced previously
• ECB Executive Board member Schnabel stated "a rate hike in June will be needed" — the clearest signal yet of imminent ECB tightening
• The growing policy gap between a hawkish ECB and a hesitant BoE is the dominant driver pushing the pair lower
• UK political uncertainty continues to simmer in the background, adding an additional risk premium to sterling

This week (Mon–Fri preview):

• Wednesday: Eurozone economic confidence — a key read on whether the ECB's hawkish stance is being tested by deteriorating sentiment.
• Thursday: US consumer spending data

Key risks:

• Strong Eurozone confidence data Wednesday reinforces the ECB June hike case and pushes the pair lower
• Any ECB speaker reaffirming Schnabel's June hike signal would add further EUR support

Most likely direction:

Bearish. The policy divergence story is now firmly established — ECB hiking whilst BoE holds is a powerful driver for further GBP weakness against EUR. Gains limited to last summers resistance area.

Underlying trend:

Bearish — GBP under sustained political pressure; the pair is increasingly being read by markets as a live indicator of Burnham's chances of taking power.

Last week's key drivers:

• Sterling fell for five consecutive sessions — its worst weekly performance since November 2024 — as the UK political crisis escalated sharply
• Andy Burnham announced plans to return to Parliament, widely seen as a direct leadership challenge to Starmer; the Makerfield by-election a key hurdle for Burnham to ovecome
• Health Secretary Wes Streeting also threw his hat in the ring to contest
• 30-year gilt yields hit 5.86% — the highest since 1998 — with GBP tracking the selloff lower

This week (Mon–Fri preview):

• Tuesday: UK employment data — average weekly earnings expected at 3.8% YoY; unemployment at 4.8%
• Wednesday: UK CPI — headline expected to ease to 3.0% from 3.3%; core to 2.6% from 3.1%. A softer print could ease BoE hike pricing and add further GBP pressure. Eurozone CPI final also prints — expected to confirm 3.0% YoY
• Thursday: Flash PMIs across UK and eurozone — UK composite seen at 51.6 vs eurozone at 48.7. Continued divergence would support GBP/EUR. ECB consumer confidence also due
• Friday: UK retail sales (expected -0.5% MoM); German IFO business climate (84.2 expected); German GDP final (0.3% QoQ)

Key risks:

• Softer UK CPI Wednesday eases BoE hike pricing and removes a key GBP support pillar
• UK PMIs Thursday holding above eurozone readings is the clearest positive scenario for GBP this week
• Hawkish ECB speakers would reinforce EUR support and extend the move lower

Most likely direction:

Bearish. Political risk dominates — key support the next level to watch, with a break opening further losses

Underlying trend:

Bearish near-term — UK political uncertainty weighing on GBP; ECB June hike expectations keeping EUR supported.

Last week's key drivers:

• UK local elections were devastating for Labour — heavy losses across England, Scotland and Wales have added a meaningful political risk premium to GBP that carries into this week
• BoE scrapped its central inflation forecast entirely, replacing it with three scenarios all pointing to hikes — a hawkish signal overshadowed by political noise
• ECB confirmed a June hike was discussed "in depth" — EUR well supported on rate expectations
• Oil swung from above $115 to below $97 before recovering on US military strikes against Iran — GBP underperformed on energy vulnerability throughout
• This morning, Trump has rejected Iran's peace proposal as "totally unacceptable" — oil up 3.1%, drone strikes on Gulf shipping overnight, and GBP is among the biggest laggards

This week (Mon–Fri preview):

• Tuesday: German ZEW — forecast to deteriorate to -19.9 from -17.2
• Thursday: UK Q1 GDP — consensus 0.6% QoQ. A beat provides Starmer political cover and supports GBP; a miss deepens the pressure on his leadership
• Thursday/Friday: Trump-Xi summit — broader risk sentiment wildcard

Key risks:

• UK political uncertainty is the dominant headwind — cabinet reshuffle expected but a leadership challenge cannot be ruled out
• Strong UK GDP Thursday is the clearest positive catalyst for GBP this week
• Weak German ZEW could temper ECB June hike expectations — the one scenario that relieves EUR pressure
• Further Hormuz escalation hits GBP disproportionately on energy exposure

Most likely direction:

Bearish near-term. Political risk and energy vulnerability dominate — UK GDP Thursday is the key reversal trigger

Underlying trend:

Cautiously bullish but stalling — GBP running into technical resistance and facing its biggest domestic risk of the week in tomorrow's local elections.

This week's key drivers (Mon–Tue):

• GBP/EUR has held near its best levels since late March but is struggling to make further headway, with resistance just above the key technical level capping progress
• US-Iran peace deal optimism has provided a constructive risk backdrop, softening the USD broadly and supporting GBP as a risk-sensitive currency
• However, political risk is building ahead of tomorrow — Labour is expected to suffer heavy losses in the local elections, suggesting GBP weakness, as political uncertainty is seen weighing on the currency more against the EUR than the USD

Rest of the week (Thu–Fri preview):

• Thursday: UK local elections — the dominant near-term risk for GBP. A bad result accelerates calls for Starmer to step down and adds meaningful political risk premium to the currency
• Friday: US non-farm payrolls — unemployment expected at 4.4% with payrolls potentially falling to -15k. Primarily a USD driver but risk sentiment spillover would influence the pair

Key risks:

• A worse-than-expected election result is the most immediate risk — political uncertainty would quickly reverse the recent GBP grind higher
• Resistance just above the key technical level is proving stubborn — GBP needs a clean political outcome and continued BoE hawkish repricing to break through
• Weak US payrolls Friday would support the risk backdrop and keep GBP underpinned; an upside surprise would provide some USD relief and limit GBP/EUR upside

Most likely direction:

Rangebound into Thursday with downside risk on the election result. The BoE divergence story remains intact structurally — but politics is the near-term swing factor

Underlying trend:

Cautiously bullish — BoE hawkish pivot and ECB caution support GBP, but UK political risk and Thursday's local elections introduce near-term vulnerability.

Last week's key drivers:

• BoE held at 3.75% but scrapped its central inflation forecast entirely, replacing it with three scenarios — all pointing to rate hikes ahead. A materially hawkish signal that repriced GBP higher
• ECB held at 2.00% but Lagarde confirmed a June hike was discussed "in depth" — keeping EUR supported but not providing the decisive hawkish commitment markets wanted
• Iran's new peace proposal to reopen the Strait of Hormuz drove risk-on flows at the start and end of the week, providing additional support for GBP/EUR

This week (Mon–Fri preview):

• Wednesday: ECB Wage Tracker — the critical release for EUR this week. Signs of easing wage expectations could temper aggressive ECB hike pricing and weigh on EUR, providing GBP/EUR support
• Thursday: UK local elections — the dominant domestic risk for GBP this week. Labour expected to lose over 70% of the 2,557 seats they are defending. A bad result adds political risk premium to GBP and accelerates calls for Starmer to step down
• Friday: US non-farm payrolls — unemployment expected to rise to 4.4% with payrolls potentially falling to -15k against a 60k consensus. Primarily a USD driver but risk sentiment spillover would affect GBP/EUR

Key risks:

• A worse-than-expected UK local election result Thursday is the most immediate domestic risk — political uncertainty would quickly add a risk premium to GBP and could reverse last week's gains
• ECB Wage Tracker showing easing wage pressures would undermine June hike expectations and weaken EUR — a GBP/EUR positive
• Conversely, sticky ECB wage data keeping hike pricing elevated would cap GBP/EUR upside given the BoE's own uncertain path

Most likely direction:

Bullish bias intact but Thursday's election result is the near-term swing factor. BoE hawkish pivot provides structural support; political risk is the key vulnerability

Underlying trend:

Bearish turn — GBP losing ground as stagflation risks build and the BoE faces its most difficult decision of the cycle.

Last three days' key drivers (Mon–Wed):

• GBP/EUR has drifted lower through the week after touching its best levels since late March on Monday, as the fundamental backdrop for GBP deteriorated sharply
• NIESR warned the UK could slip into recession if the Middle East crisis worsens, with inflation potentially hitting above 5% in an adverse scenario — a stagflation narrative that weighs heavily on GBP
• ECB rate hike expectations firmed to 69 basis points by year end, contrasting with growing uncertainty over the BoE's path — a shift in the relative rate story that has favoured EUR
• UK political risk resurfaced Monday as PM Starmer faced a parliamentary vote on the Mandelson appointment investigation, adding a domestic premium to sterling at the worst possible time
• EUR has proven more resilient than GBP in the current environment, holding up better against the energy shock given the diverging rate expectations

Rest of the week (Thu–Fri preview):

• Thursday: BoE and ECB both announce — neither expected to move, but the messaging is everything
• BoE expected to hold at 3.75% with an 8-1 vote split and three hikes priced by year end — any dovish surprise on guidance would hit GBPhard
• ECB holds at 2.00%; Lagarde expected to keep June hike options open — a hawkish commitment would support EUR and push the pair lower
• Eurozone Q1 GDP expected at 0.2% QoQ; German GDP at just 0.1% — first signs of Iran war damage
• Eurozone CPI expected at 3.0% YoY; core at 2.2% — a hot print would reinforce ECB hike expectations
• Friday: UK mortgage approvals and final UK manufacturing PMI (53.3 expected)

Key risks:

• A dovish BoE — particularly if forward guidance disappoints three-hike pricing — would push the pair meaningfully lower
• A hawkish Lagarde committing clearly to a June hike would compound EURstrength and accelerate the move
• Oil at $126 and potential US military action against Iran is the wildcard — further escalation would hit GBP disproportionately given the UK's greater energy vulnerability

Most likely direction:

Bearish for GBP/EUR into Thursday. The BoE vote split and guidance are the defining moment — the risk is firmly skewed toward GBP weakness

Underlying trend:

Bullish — GBP outperforming on a genuine data surprise; EUR weighed by collapsing PMIs, stagflation risks and a divided ECB.

Last week's key drivers:

• UK PMIs smashed forecasts at 52.0 versus 49.8, triggering sharp BoE rate hike repricing to 61 basis points — markets now fully pricing two hikes this year
• UK retail sales also beat, reinforcing domestic resilience under the energy shock
• Eurozone PMIs collapsed to 48.6 with Nomura flagging stagflation risks; ECB commentary turned increasingly divided
• GBP was the best performing G10 currency on Friday;

This week (Mon–Fri preview):

• Tuesday: ECB Bank Lending Survey — if credit conditions are already tightening, it strengthens the case for the ECB to look through the energy shock rather than hike
• Thursday: The defining day — BoE and ECB both announce alongside Eurozone Q1 GDP and CPI
• BoE expected to hold at 3.75% with a 7-2 vote split; new forecasts likely show inflation undershooting target medium-term — signalling multiple hikes are far from certain
• ECB expected to hold at 2.00%; Lagarde likely to flag June as a potential hike meeting if commodity disruption persists
• Eurozone Q1 GDP expected at just 0.2% QoQ — first signs of Iranwar damage; Germany most at risk at 0.1%
• Eurozone CPI expected at 2.8% YoY but core forecast to slip to 2.1% — weakening the case for aggressive ECB tightening

Key risks:

• A dovish BoE — particularly if forward guidance pushes back on two hikes — would quickly unwind recent GBP gains
• Weak eurozone GDP and a cautious Lagarde would extend EURunderperformance
• Softening core CPI materially undermines aggressive ECB hike pricing — if markets unwind that, EUR faces further headwinds

Most likely direction:

Bullish bias maintained. BoE vote split and guidance are the critical variable — a hawkish hold keeps the move intact; a dovish surprise reverses it sharply

Underlying trend:

Mild GBP strength — UK data outperforming a softening eurozone, with the pair grinding higher through the week.

Last three days' key drivers (Mon–Wed):

• GBP/EUR has edged higher each session this week, supported by a combination of positive UK data and deteriorating eurozone sentiment
• UK employment data (Tuesday) provided a solid foundation for GBP.
• German ZEW cratered in April, with eurozone sentiment deteriorating sharply — a clear headwind for EUR
• UK CPI came in at 3.3% in March (from 3.0%), meeting expectations. The rise was energy-driven, but the in-line print was enough for GBP to make a new high this month
• ECB officials signalled caution this week — Stournaras said the bank "should wait" ahead of next week's meeting — further limiting EUR upside
• Geopolitical noise provided the backdrop: Trump extended the Iran ceasefire on Wednesday, but Iranian gunboats firing on ships in the Strait of Hormuz kept risk sentiment fragile

Rest of the week (Thu–Fri preview):

• Thursday: Flash PMIs for both UK and eurozone — the pivotal release of the week
• Eurozone composite expected at 50.0 (from 50.7); services forecast to slip into contraction at 49.8
• UK composite seen at 49.8 (from 50.3) — both economies hovering at the expansion/contraction boundary
• Friday: Quiet session; consolidation and position squaring ahead of the weekend

Key risks:

• If eurozone PMIs disappoint more than the UK reading, the divergence trade would extend — GBP/EUR has room to test higher, with 1.1550 the next level to watch
• A sharper-than-expected UK PMI miss would test whether this week's GBPstrength has legs, and could quickly reverse the grind higher
• ECB meeting next week increasingly in focus — any further dovish signals from officials Thursday would compound EURweakness
• Any Strait of Hormuz escalation would weigh on both currencies via energy prices, but the UK's greater gas exposure creates asymmetric downside risk for GBP in a genuine shock scenario

Most likely direction:

Modest consolidation around current levels. Relative data performance Thursday will determine whether the GBP grind continues or stalls. Downside risk below 1.1500 only on a significant UK miss

Underlying trend:

Bearish — EUR outperforming as ECB hawks signal two rate hikes this year as a “fair expectation,” while the BoE remains cautious despite stronger UK GDP.

Last week’s key drivers

• Hormuz reopening eased energy concerns and supported risk sentiment, but EUR outperformed GBP on central bank divergence.
• Strong UK GDP (0.5%) was overshadowed by dovish BoE messaging.
• ECB officials flagged two rate hikes as a “fair expectation,” contrasting sharply with the BoE, driving GBPEUR lower.
• UK political uncertainty briefly weighed on GBP, though losses were recovered into week-end.

The week ahead (Mon–Fri preview):

• Tuesday: UK jobs data (07:00 BST). German ZEW expected to fall to -6 (from -0.5).
• Wednesday: UK CPI (3.3% YoY expected) and Eurozone consumer confidence.
• Thursday: Flash PMIs — UK seen at 49.8, Eurozone at 50.0. ECB speakers, including Lagarde, will be key ahead of the April 30 meeting.
• Friday: UK retail sales and German Ifo survey.

Key Risks

• Continued ECB hawkish rhetoric supports EUR.
• Weak UK growth + rising inflation creates a negative backdrop for GBP.
• Any dovish shift from the ECB could ease GBPEUR downside.
• Renewed geopolitical tension would reintroduce energy volatility.

Underlying trend:

Neutral with cautious undertone — medium-term direction remains lower

Factors in price action:

• The cross has been driven primarily by relative safe-haven flows and energy exposure differentials, with sterling underperforming despite the euro facing its own headwinds from weak German industrial production data
• The pound's higher war premium in options markets compared to the euro reflects trader concerns about the UK's greater vulnerability to energy price shocks
• BoE rate cut expectations, softening UK data, and political uncertainty ahead of the May 7th local elections continue to weigh on GBP
• ECB Governing Council member Sleijpen warned this weekend that high oil prices will feed through to wages and broader prices, adding to hawkish ECB chatter and keeping EUR supported
• Hungary's pro-European opposition securing a landslide election victory has provided modest additional euro support, with markets anticipating unlocked EU funding

Key data ahead:

• Wednesday: French CPI EU Harmonised YoY (Mar F) — consensus 1.9% vs. prior 1.9%; French CPI YoY (Mar F) — consensus 1.7% vs. prior 1.7%
• Thursday: UK Industrial Production MoM (Feb) — consensus 0.3% vs. prior -0.1%; Manufacturing Production MoM — consensus 0.2% vs. prior 0.1%; Trade Balance — consensus -£2,000m vs. prior £3,922m; Eurozone CPI YoY (Mar F) — consensus 2.5% vs. prior 2.5%; CPI Core YoY (Mar F) — consensus 2.3% vs. prior 2.3%

Middle East developments:

• The collapse of US-Iran peace talks over the weekend has reignited geopolitical tensions, with Trump ordering a Strait of Hormuz blockade beginning Monday — oil prices have surged over 8%
• The UK and France will co-host a summit this week on coordinated efforts to protect shipping in the strait when the conflict ends
• Russia has indicated willingness to accept Iran's enriched uranium as part of any peace agreement
• The situation remains highly fluid with significant implications for energy-dependent European economies

Key risks ahead:

• Sterling faces a lose-lose scenario on yields and growth risks, making the cross vulnerable to downside if energy prices remain elevated — the UK's greater exposure to energy shocks compared to the eurozone creates asymmetric risks for the pound
• The BoE rate cut narrative, combined with domestic political uncertainty ahead of May 7th, limits GBP's ability to recover even if geopolitical tensions ease
• Thursday's UK production data is the key domestic catalyst; a surprise to the upside could provide temporary support for sterling

Most likely direction:

rangebound with a downside bias for sterling — the medium-term direction remains lower unless de-escalation news triggers a sharp relief rally

Underlying trend:

Short term rangebound

Factors in price action:

• The US-Iran ceasefire announcement on Wednesday triggered a sharp rally in risk assets and energy prices tumbled, prompting traders to aggressively pare ECB rate-hike bets from 80bps to 53bps for the year
• UK gilts surged on Wednesday with two-year yields falling 25 basis points to 4.16%, while traders cut BoE rate-hike expectations from 60bps to 32bps
• UK house prices fell 0.5% in March according to Halifax data released Wednesday, the first snapshot since the Iran war began

Key data ahead:

• Friday: German CPI final readings (2.7% YoY expected)

Middle East developments:

• The two-week US-Iran ceasefire agreed Wednesday has already shown signs of fragility, with Iran accusing the US of breaching the agreement, weighing on risk sentiment
• Oil prices have rebounded modestly after Wednesday's 19% plunge, creating uncertainty about the durability of the truce
• ECB officials warned that a longer Iran war would be "very bad" for inflation and growth, with potential for multiple rate hikes if the conflict drags on

Key risks ahead:

• Ceasefire breakdown could push GBPEUR lower as UK energy vulnerability resurfaces but most likely direction rangebound

Underlying trend:

Consolidating with mild upward bias

Factors in price action:

• Safe-haven flows dominated as markets counted down to Trump's Tuesday 8pm ET deadline for Iran to accept ceasefire terms
• Eurozone investor confidence crashed to a one-year low at -19.2 in April (from -3.1 in March), with the Sentix index plunging 16.1 points due to the Iran war, casting doubt on the region's nascent recovery
• GBPEUR steady in a 30 pips range amid a relatively hawkish ECB tone, though geopolitical uncertainty limited directional conviction
• Iran rejected multiple ceasefire proposals including a Pakistan-brokered plan, instead tabling its own 10-point counter-proposal, dimming prospects for a breakthrough

Key data ahead:

• Tuesday: Final March PMIs for France (Services 48.3, Composite 48.2), Germany (Services 51.2, Composite 51.9), and Eurozone (Services 50.1, Composite 50.5); UK Services PMI 51.2, Composite 50.8
• Wednesday: German Factory Orders (forecast +2.0% vs -11.1% prior); UK Construction PMI (44.0 vs 44.5 prior)
• Thursday: German Industrial Production (+0.6% vs -0.5% prior); UK RICS House Price Balance
• Friday: Final German CPI (1.1% MoM, 2.7% YoY)
• Middle East: Trump's Tuesday 8pm ET deadline for Iran to reopen the Strait of Hormuz or face destruction of bridges and power plants within hours

Key risks ahead:

• Geopolitical risk dominates: failure to reach Iran ceasefire by Tuesday deadline could trigger safe-haven EUR strength if risk-off intensifies, though energy vulnerability may cap gains
• Weak Eurozone sentiment data (Sentix at -19.2) suggests downside growth risks, potentially weighing on EUR if data disappoints
• German factory data critical—rebound from -11.1% would support EUR; further weakness could pressure the pair lower

Most likely direction:

Range-bound with slight GBP upside bias, unless Iran situation escalates sharply

Underlying trend:

Sterling has been under pressure against the euro, declining from recent highs. The trend favors euro strength driven by central bank policy divergence and relative economic resilience.

Factors in price action:

• ECB hawkish stance: ECB officials haven't ruled out an April rate hike, with markets pricing 63 basis points of increases by year-end. ECB hawks positioned to benefit from de-escalation trade.
• BOE rate repricing: Sterling weakened as BOE rate hike expectations were scaled back. Governor Bailey's comments that markets are "getting ahead of themselves" reinforced dovish repricing.
• UK energy vulnerability: The UK economy is among the hardest hit from energy-price shocks. UK factories endured the most intense supply chain stress since 2022, contrasting with Eurozone manufacturing reaching a 45-month high of 51.6.
• Financial stability concerns: The Bank of England warned Britain risks a financial crisis from the Iran war, with an extra million people facing higher mortgage repayments.
• Eurozone economic outlook: ECB member Dolenc said the euro-zone economy may already be in an adverse scenario, but the region appears more resilient than the UK to current shocks.

Key data ahead:

• Friday: Eurozone industrial production expected to decline 0.1% month-on-month in February, down from a 0.5% gain. Year-on-year growth forecast at 1.6% versus 2.4% prior. US employment data also in focus.
• Middle East developments: Any progress on Strait of Hormuz reopening will be critical for energy prices, which disproportionately affect the UK versus the Eurozone.

Key risks ahead:

• Downside risks for sterling: If ECB maintains hawkish rhetoric while BOE remains cautious, further sterling weakness likely. UK economic data remains fragile, with energy shocks and weak growth creating headwinds.
• Upside risks for sterling: If Iran de-escalation accelerates and energy prices fall sharply, UK inflation concerns ease, potentially supporting sterling. However, structural UK vulnerabilities limit upside.

Most likely direction (Thu-Fri):

Modest euro strength expected. Central bank policy divergence remains the dominant theme.

Underlying trend:

Range trading as geopolitical tensions and energy price shocks weigh on the eurozone than the UK.

Factors in price action:

• Iran war driving safe-haven flows and elevated oil prices. Euro particularly vulnerable due to Europe's greater energy dependence, whilst sterling vulnerable to stagflation concerns.

This week (Mon–Fri preview):

• Tuesday, March 31: Eurozone March CPI flash estimate expected to jump to 2.6% - the biggest increase since 2022, driven by energy costs. UK GDP figures will show how Britain's economy is handling the current environment.

Key risks ahead:

• Likely to remain directionless in the short term. Both currencies face similar headwinds from energy shocks and growth concerns, so movement will depend on which central bank sounds more aggressive on rates or which economy shows more resilience

Underlying trend:

Relatively stable with modest GBP strength following divergent central bank messaging on Thursday 19 March, trading within a narrow 1.1575–1.1590 range over the past week

Trend bias:

• Relatively stable with modest GBP strength following divergent central bank messaging on Thursday 19 March
• Trading in narrow range around 1.1575-1.1590 over the past week

Factors in price action:

• BoE delivered hawkish hold with markets pricing 63 basis points of hikes by year-end
• ECB also held rates with markets pricing more than two quarter-point hikes in 2026
• Both central banks responding to inflation risks from Middle East conflict and surging energy prices
• There is more scope for the BoE to disappoint hawkish bets than the ECB, which could halt the pound's advance against the euro

This week (Mon–Fri preview):

• Monday: EUR Consumer Confidence expected to weaken to -14.6 from -12.2
• Tuesday: Eurozone PMIs forecast to decline (Manufacturing 49.3, Services 50.5) versus UK PMIs expected to soften modestly (Services 53.0, Manufacturing 51.0)
• Wednesday: UK CPI expected steady at 3.0% YoY; German IFO Business Climate anticipated to weaken significantly from 88.6 to 86.3
• Thursday: German GfK Consumer Confidence, Eurozone Manufacturing and Consumer Confidence, M3 Money Supply
• Friday: UK Retail Sales forecast to cool substantially; UK Consumer Confidence expected to deteriorate from -19 to -25

Key risks ahead:

• GBPEUR downside risks: Weaker UK economic data (retail sales, consumer confidence) may undermine BoE hawkish stance; softer UK PMIs relative to Eurozone
• GBPEUR upside risks: Sticky UK inflation supporting BoE tightening expectations; German economic weakness (IFO deterioration) may weigh on EUR

Most likely direction:

Modest GBP weakness - BoE and ECB reaction functions to dictate course, with more scope for BoE to disappoint hawkish bets; UK economic softening may offset inflation concerns

Underlying trend:

Sterling outperforming euro but vulnerable to reversal

Factors in price action:

• Large repricing in central bank policy expectations made pound best performing non-commodity G10 currency against dollar since Iran conflict began
• BoE pricing saw more substantial shift compared to ECB given stubbornness of UK inflation and higher reliance on gas
• Two-year UK yields outpacing German peers, dragging EUR/GBP lower
• Energy price surge benefiting sterling relatively given repricing dynamics

This week (Thurs–Fri preview):

• Back-to-back BoE and ECB decisions Thursday will dictate course for the pair
• ECB expected to hold deposit rate at 2%, BoE at 3.75%
• Markets now pricing more than two quarter-point ECB hikes in 2026
• Relative hawkishness of guidance from both central banks will be critical

Key risks ahead:

• More scope for BoE to disappoint hawkish bets than ECB, which could halt pound's advance
• Sterling will struggle to hold recent gains given political instability and weak macroeconomic climate, according to Rabobank
• Energy shock weighs on both currencies but UK's higher gas reliance creates differentiation

Most likely direction:

modest euro gains if BoE signals dovish bias while ECB maintains hawkish stance

Underlying trend:

Bullish. Sterling has strengthened against the euro as UK gas reliance drives more aggressive BoE rate repricing versus ECB

Factors in price action:

• UK's heavier gas reliance makes sterling more sensitive to energy-driven rate expectations
• BoE pricing shifted more substantially than ECB due to stubborn UK inflation and higher gas dependence
• Energy price rally making two-year UK yields outpace German peers
• Fading BoE rate-cut bets supporting the pound

This week (Mon–Fri preview):

• Both BoE and ECB meetings on March 19 will be critical
• More scope for BoE to disappoint hawkish bets than ECB, potentially halting pound's advance
• Traders balancing softening UK economy against potential dovish BoE dissent
• Inflation concerns will dominate in Europe

Key risks ahead:

BoE dovish surprise on growth concerns could reverse sterling gains. Unexpected ECB hawkish messaging could support euro. Energy price volatility given UK gas sensitivity. Most likely direction: consolidation with risk of reversal if BoE disappoints hawkish expectations.

Underlying trend:

March uptrend still intact as we approach the 2026 high.

Factors in price action:

• GBP outperforming EUR due to stronger yield support and lower energy exposure.
• Oil price moderation midweek helped temper some EUR weakness.
• GBP resilience limited by political headlines and ongoing domestic economic uncertainty.

This week (Thu–Fri preview):

• GBP: Industrial Production, Manufacturing Production, Trade Balance — may test GBP support.
• EUR: France CPI, Germany data — headline inflation remains key.
• USD: Core PCE, PCE, GDP price data — indirectly impacts GBPEUR through USD flows.

Key risks ahead:

• Soft UK data → GBPEUR lower.
• Strong EUR data → cross higher.
• Energy prices and geopolitical developments → cross volatility

Underlying trend:

Neutral-to-soft — GBP supported by BoE repricing but constrained by risk-off flows; EUR pressured by energy risk and muted Eurozone growth.

Factors in price action:

• GBP benefitted off favouring rate differentials vs EUR
• EUR volatility with rising oil/gas prices and geopolitical uncertainty damaging support

This week (Mon–Fri preview):

• UK: Industrial production, trade, manufacturing — GBP-sensitive data.
• Eurozone: CPI, factory orders — potential EUR drivers.
• US: Core PCE, GDP, durable goods, personal spending/income, JOLTS — influence cross via USD.

Key risks ahead:

• Geopolitical/energy shocks → GBP under pressure via USD flows.
• UK political headlines or BoE commentary → GBP volatility.
• EURGBP may remain near recent lows, with upside limited unless risk sentiment improves.

Underlying trend:

Soft — GBP pressured by weak UK economic signals, BoE caution, and strong USD; EUR steadied but faces downside pressure from US flows and energy risk.

Factors in price action:

• GBP gains early in the week faded as dovish BoE comments and fragile UK economic signals reinforced easing expectations.
• EUR mostly stable vs GBP, though elevated energy prices and risk-off sentiment limited upside.
• Cross remains sensitive to UK economic releases and USD-driven flows.

This week (Thu–Fri preview):

• UK: Political headlines and BoE commentary remain the main GBP drivers.
• Eurozone: GDP final 4Q, German factory orders — potential EUR drivers.
• US: Payrolls, unemployment, retail data — influence cross indirectly via USD.

Key risks ahead:

• Softer UK data or political headlines → GBPEUR lower.
• Further rise in energy prices → GBPEUR higher.
• Cross trading near recent lows → volatility likely if data surprises occur.

Underlying trend:

Soft — GBP pressured by political uncertainty and BoE easing expectations; EUR stable with minor downside risk.

Factors in price action:

• GBP lost ground as BoE comments remained dovish and by-election risks added to political premium.
• EUR mostly steady vs GBP but weighed by weak German sentiment and risk-off flows favoring USD.

This week (2–6 Mar):

• UK: Political risk and PMIs — headline sensitivity for GBP.
• Eurozone: CPI, PMIs, unemployment — potential driver of EUR vs GBP.
• US: Payrolls, unemployment, retail → impact cross indirectly via USD.

Key risks ahead:

• Political uncertainty or weak UK data → GBPEUR lower.
• Eurozone CPI/PMI surprises → GBPEUR higher.
• USD strength → GBP weaker vs EUR → cross pressured.

Underlying trend:

Soft — GBP pressured by political uncertainty and dovish BoE expectations; EUR steady but with minor downside bias.

Factors in price action:

• GBP remained sensitive to dovish BoE signals, ongoing political risk around Gorton & Denton by-elections, and lingering market caution from recent CPI and labour data.
• EUR mostly stable vs GBP but weighed by weaker German sentiment and risk-off flows.
• The cross remains sensitive to Eurozone CPI, PMIs, and USD-driven market moves.

This week (23–27 Feb):

• UK: Political/fiscal developments — key for GBP direction.
• Eurozone: Final CPI and PMIs — potential driver of EUR performance vs GBP.
• US: Durable goods, regional surveys, jobless claims, PPI — influence the cross indirectly via USD.

Key risks ahead:

• Softer UK political/fiscal developments → GBPEUR lower.
• Eurozone CPI/PMI surprises → GBPEUR higher.
• Strong USD → GBP weaker vs EUR → cross pressured.

Underlying trend:

Soft — GBP pressured by weak jobs data, dovish BoE, and USD strength; EUR steady but with minor downside bias.

Factors in price action:

• GBP gains early in the week faded as weak UK jobs and dovish CPI reinforced expectations for a March rate cut.
• EUR mostly stable vs GBP but affected by German sentiment and USD strength.
• Cross remains sensitive to UK labour/inflation prints, Eurozone PMIs, and USD-driven market flows.

This week (Thu–Fri preview):

• UK: Retail sales and PMIs — key for GBP sensitivity.
• Eurozone: HCOB PMIs — potential driver of EUR performance vs GBP.
• US: Core PCE, GDP, PMIs — influence cross indirectly via USD.

Key risks ahead:

• Softer UK retail/PMIs → GBPEUR lower.
• Strong Eurozone PMIs → GBPEUR higher.
• GBPEUR sitting on the 2026 low support area

Underlying trend:

Neutral-to-soft — GBP recovering politically but euro-area trade and disinflation dynamics cap upside.

Factors in price action (Mon–Wed):

• GBP supported Monday by Starmer cabinet unity but stalled awaiting GDP (Thu).
• EUR steady vs GBP; early-week USD weakness allowed minor GBP/EUR gains
• Cross is sensitive to relative risk sentiment and political headlines in the UK.

This week (Thu–Fri preview):

• UK: Q4 GDP (Thu) — key driver for GBP performance.
• Eurozone: Trade data (Fri) — influences EUR and cross via sentiment.

Key risks ahead:

• UK GDP or political surprises → GBPEUR lower.
• Trade data easing → EUR softens → GBPEUR higher.

Underlying trend:

Soft — GBP remains underperforming vs EUR amid political uncertainty and dovish BoE bias.

Factors in price action:

• GBP weakness driven by BoE dovishness and UK political uncertainty.
• EUR supported relative to GBP despite ongoing trade headwinds and disinflation.

This week (9–13 Feb):

• UK: Q4 GDP release expected to show a soft end to 2025; early 2026 may see modest recovery as budget uncertainty fades
• Eurozone: Trade data provides additional context for EUR performance.

Key risks ahead:

• Weak UK GDP or worsening political headlines → GBPEUR lower.
• Euro-area trade surprise → EUR underperforms → GBPEUR higher.

Underlying trend:

Rangebound — both legs face policy uncertainty, limiting conviction.

Factors in price action:

• GBP and EUR both benefited from early-week USD weakness but gave back ground as USD stabilised.
• UK policy uncertainty ahead of the BoE contrasts with euro-area disinflation but steadier growth signals.
• Cross remains driven by relative central bank tone rather than outright growth optimism.

This week (2–6 Feb):

• UK: BoE decision and updated forecasts the main event risk for GBP.
• Eurozone: January CPI print key for confirming the disinflation trajectory.
• Eurozone: ECB communication watched closely for any discomfort with FX levels.

Key risks ahead:

• Dovish BoE signals → GBPEUR lower.
• Euro-area inflation undershoot → EUR softens → GBPEUR higher.
• Any hawkish tilt from ECB vs cautious BoE → GBPEUR pressured.

Underlying trend:

Rangebound — cross driven by relative political and trade risk rather than macro strength.

Factors in price action:

• UK fundamentals remain soft, keeping GBP structurally fragile.
• EUR sentiment weighed down by EU-specific tariff threats, partially offsetting UK underperformance.
• Recent USD weakness and broader risk-off dynamics have reduced directional conviction in the cross.

This week (26–30 Jan):

• UK: Light data leaves GBP reactive to global sentiment.
• Eurozone: Preliminary Q4 GDP and confidence indicators

Key risks ahead:

• Escalation in US–EU trade tensions → EUR underperforms → GBPEUR higher.
• Weak UK headlines or risk-off shock → GBP underperforms → GBPEUR lower.
• De-escalation in trade rhetoric → EUR stabilises, cross refocuses on UK weakness.

Underlying trend:

Lower — EUR weakness offsets some GBP fragility, but the cross still favours downside.

Factors in price action:

• UK fundamentals remain soft, keeping GBP structurally weak.
• However, EU-specific tariff risks tied to Greenland place disproportionate pressure on EUR sentiment.
• The cross increasingly trades relative political risk rather than macro differentials.

This week (19–23 Jan):

• UK: Job market data (Tue) and inflation (Wed) all in focus this week and whether we see more dovish pricing on BoE rates
• Eurozone: Flash PMIs (Fri).
• Trade headlines remain a key driver of intraday volatility.

Key risks ahead:

• Escalation in US–EU trade tensions → EUR underperforms → GBPEUR higher.
• Weak UK job and inflation data → GBP drags the cross lower.
• De-escalation rhetoric → EUR stabilises, cross reverts to GBP weakness.

Underlying trend:

Downside bias — EUR remains the more stable leg as UK macro underperforms.

Factors in price action:

• UK growth data continues to disappoint, keeping GBP sentiment fragile.
• Euro-area data remains weak but predictable, limiting downside volatility.
• EUR hindered by threat of US/Greenland geopolitics.

This week (12–16 Jan):

• UK: Monthly GDP and production data — unlikely to shift the narrative unless sharply weaker.
• Eurozone: CPI finalisation and industrial output updates.
• US CPI may spill over indirectly via risk sentiment.

Key risks ahead:

• Weak UK GDP → GBPEUR lower.
• US CPI downside supports risk sentiment → EUR outperforms GBP.
• Any upside surprise in UK data → short-lived GBP relief.

Trend bias:

Rangebound with a mild upside bias — EUR supported by relative stability, but USD data dominates.

Factors in price action:

• Eurozone outlook remains steady after disinflation progress late last year.
• ECB firmly in wait-and-see mode early in 2026, limiting policy volatility.
• USD direction driven by US job data and ISM surveys rather than inflation.

This week (5–9 Jan):

• Eurozone: December CPI – focus on whether disinflation progress continues
• US: ISM services and December job numbers towards the end of the week will set the tone for USD. Fed speakers return, though unlikely to materially shift near-term pricing.

Key risks ahead:

• Weak US jobs report → USD selling → EURUSD higher.
• Job resilience → USD strength → EURUSD pressured.
• Risk-off tone → EUR underperforms USD but holds vs high-beta FX.

Trend bias:

Lower — GBP underperforms EUR into BoE easing.

Factors in price action:

• UK job softness and a likely BoE rate cut contrast with ECB policy stability.
• Euro-area data flow (PMIs, Ifo) provides clearer signals than UK growth prints.
• GBP remains sensitive to any inflation upside surprise ahead of the BoE.

This week:

• Tue: UK job market data; Eurozone flash PMIs.
• Wed: UK CPI; Germany Ifo.
• Thu: BoE cut expected, ECB holds.
• Fri: UK public finances, retail sales, confidence.

Key risks ahead:

• UK CPI upside surprise → GBP relief rally → GBPEUR higher.
• Soft UK job + dovish BoE → GBPEUR lower.
• Strong euro-area PMIs → EUR outperformance.
• Risk-off USD moves could indirectly weigh on GBP more than EUR.

Trend bias:

Mild GBP downside — UK continues to underperform globally, leaving EUR the steadier leg.

Factors in price action:

• GBP was boosted after services PMI’s were revised higher for Novembers final numbers
• EUR supported on data supporting that the ECB will likely not cut rates any further.

This week:

• UK: UK Jobs Report (REC/KPMG): labour market still weak; hiring intentions in focus.
• UK: Monthly GDP (Oct) expected +0.1%; consumption trends still soft.
• UK: Bailey + multiple BoE MPC appearances; Reeves questioned by Parliament.
• Eurozone: Germany Industrial Production (Oct): expected +0.4% MoM after last month’s strong rebound; upside possible.
• Eurozone: Germany trade data: softer exports but a larger surplus

Key risks ahead:

• Weak UK GDP or soft labour → GBPEUR lower.
• Strong German IP or firmer trade → EUR support.

Trend bias:

Rangebound — slight EUR advantage as euro-area data offers more direction than UK.

Factors in price action:

• Euro-area inflation expected to stay just above 2% in November before easing in December.
• Slowing Q3 wage growth softens persistence concerns.
• GBP goes through relief rally with the Autumn Budget taken in the markest stride and bond markets being appeased..

This week (1–5 Dec):

• Euro-area: November flash CPI, wages, unemployment.
• UK: Sparse data → GBP largely a passenger to EUR moves.

Key risks ahead:

• EZ CPI downside surprise → EUR softens, GBPEUR higher to test key resistance
• ECB rhetoric leans hawkish despite easing inflation → EUR firmer.

Trend bias:

Downside bias — GBP remains the weaker leg unless eurozone inflation undershoots materially.

Factors in price action:

• GBP continues to trade heavy amid UK fiscal uncertainty and soft demand data.
• EUR has a busy week of domestic inflation and sentiment inputs, giving it relative stability vs GBP.
• Cross continues to follow the relative data surprise model: weak UK + steady EU → GBPEUR lower.

This week (24–28 Nov):

• Budget focus: Chancellor Rachel Reeves faces a major credibility test — with income-tax hikes reportedly ruled out, reliance on smaller revenue measures may not fully reassure markets.
• Eurozone: German, French, Spanish, Italian inflation; German Ifo; Lagarde & Lane speeches.

Key risks ahead:

• Strong euro-area CPI → GBPEUR lower.
• Reeves fails to deliver a credible fiscal path → sustained GBP underperformance..

Our view:

GBPEUR trades vulnerable going into budget backdrop and the fallout will likely determine future direction of the pair

Trend bias:

Still biased lower — GBP struggles to outperform the euro absent strong UK data or clearer fiscal direction.

Factors in price action:

• UK CPI deceleration vs. eurozone services inflation stickiness sets up a relative-inflation narrative that has recently favoured the EUR.
• UK Budget uncertainty is amplifying GBP caution.
• Market increasingly focuses on relative macro performance as both regions enter a data-heavy week.

This week:

• UK headline CPI (Oct) + UK Flash PMI — both critical for GBP direction.
• Eurozone HICP (final) + ECB negotiated wages (Q3) — key for the EUR leg.
• Ongoing UK Budget chatter ahead of the Autumn Statement.

Key risks ahead:

• If UK CPI slows sharply while euro HICP/wages show stickiness → downside risk for GBPEUR.
• UK Budget uncertainty could extend GBP underperformance until fiscal plans are clarified.
• If euro wages soften or eurozone PMIs underwhelm, EUR may struggle — allowing GBPEUR to lift even if UK data is soft.
• NFP-driven swings in risk appetite may filter into GBPEUR volatility.

Our view:

GBPEUR is in a relative-data tug-of-war, but with UK fiscal uncertainty and weaker domestic momentum, risks lean mildly lower unless eurozone inflation/wage data disappoints.

Trend bias:

Still tilted to the downside after hitting new 2 ½ year lows.

Factors in price action:

GBP was weak going into last week’s BoE meeting on speculation that there could have been a surprise rate cut. No rate cut meant that markets covered their GBP shorts and we saw a rebound on the paid but nonetheless the pair remains in its September downtrend.

This week (key items):

• GBP: Job numbers and then 3rd quarter growth numbers will be the focus this week as we gauge how the economy is doing. Soft numbers will likely add pressure back on GBP as well as continue to mount pressure on Chancellor Rachel Reeves ahead of her budget on November 26th
• EUR: Second estimates of growth and job data due on Friday but unlikely to have a big impact unless we have a big deviation.

Key risks / scenarios:

• UK data likely to take precedence this week and an improvement in the job and UK growth numbers will be needed to see GBP continue to rebound from the lows

Trend bias:

Bearish — GBP remains weaker relative to EUR.

Factors in price action:

• GBP declined with inflationary pressures easing raising the odds of a rate cut in December as well as the OBR downgrading productivity forecasts for the UK.

This week (3–7 Nov):

• The Bank of England will be in focus on Thursday with the latest interest rate decision as well as their Monetary Policy which will include updated growth/inflation forecasts for the UK. The BoE are not currently expected to cut rates this month, however, there has been calls from Goldman Sachs and Barclays that the BoE could well cut in this meeting. In light of the upcoming budget and recent CPI numbers, there is a good possibility that this meeting could be seen as dovish

Key risks ahead:

• If the BoE signals more dovishness, GBPUSD could drop further with no clear support on the pair until the lows in April
• Conversely, if BoE holds firm (less dovish than expected) and risk sentiment improves, GBPUSD may rally but likely capped given underlying UK headwinds and the upcoming Budget

Trend bias:

Likely biased lower — GBP remains vulnerable relative to EUR still in light of concerns over Autumn Budget

Factors in price action:

• Lower than expected CPI numbers added to rate cut bets from the BoE putting pressure on GBP
• The EUR remains supported by the ECB’s cautious tone and lingering inflation concerns, even as eurozone growth slows.

This week (27–31 Oct):

• UK: With limited UK macro prints this week, GBP moves may be more sensitive to broad FX flows and external shock.
• Eurozone: On Thursday: ECB rate decision, Q3 preliminary GDP, unemployment, consumer confidence and CPI prints

Key risks ahead:

• If eurozone prints disappoint or ECB surprises dovish, GBPEUR could see some bounce.
• Encouraging numbers from the Eurozone and the 2025 lows could be under threat

Trend bias:

Still skewed to downside — GBP appears weaker relative to EUR under current dynamics unless GBP surprises.

Factors in price action:

• The cross will reflect the interplay between GBP’s inflation surprise (or disappointment) and EUR’s performance in the broader FX space.
• With limited USD-driven moves, cross flows may dominate — especially GBP vs EUR relative strength.
• Any eurozone surprise — positive or negative — could shift the balance.

This week (20-24 Oct):

• UK: CPI inflation will be the dominant input for GBP strength or weakness.
• Eurozone / EUR: Flash PMI (Friday) is key for EUR relative performance.
• Other: News flows, risk sentiment, and capital flows will likely accentuate cross moves.

Key risks ahead:

• If GBP inflation surprises upward, GBPEUR may see rally attempts (GBP strength).
• If EUR holds up or outperforms (or USD weakens broadly), GBPEUR downside may be limited.
• Again, fiscal surprises or data revisions in the UK could trigger outsized swings in the cross.
• Positioning risk into the flash PMI / CPI data could magnify moves.

Trend bias:

Bearish bias remains — GBP underperforming vs EUR given relative political and economic headwinds.

Factors in price action:

• Sterling remains under pressure amid weak UK fundamentals and political uncertainty.
• EUR weaker on back of political headwinds but moves minimal versus GBP

This week (13–17 Oct):

UK: The spotlight falls on the labour/employment report for September (jobs, wage growth) — a key input into BOE rate expectations. EU: CPI data, ECB commentary.

Key risks ahead:

• Strong wage growth or tight labour market data would push back against GBP weakness, possibly triggering a relief bounce toward resistance.
• Weak jobs numbers or indications of labour softening may accelerate downside pressure, with GBPUSD potentially revisiting the August and May low
• A soft eurozone CPI could add pressure on EUR

Trend bias:

Found support off the July, August and September lows

Factors in price action:

Pound sterling looks set for further downside against the euro in the coming weeks, with the GBP/EUR exchange rate surprising early last week with an impressive rally, which quickly faded and a series of daily losses ensued. This reinforces the optimum tactical approach to GBP/EUR is to 'sell on rallies'.

This week:

• Eurozone: ECB Minutes

Key risks ahead:

• It would need a dovish minutes to see EUR sentiment weaken.

Trend bias:

August downtrend still intact but support found on the August/July lows

Factors in price action:

Market sentiment on the UK remains negative with continued concerns of the UK economy which was illustrated by the worse than expected PMI numbers versus better than expected PMI numbers from Europe.

This week:

• UK: Labour party conference.
• Eurozone: EU CPI

Key risks ahead:

• Markets will be listening out for any hints from Chancellor Rachel Reeves of what could be released in the Autumn budget.
• Given markets are firmly pricing in no more rate cuts by the ECB – sharp fall in CPI could spur on rate cut bets and weaken EUR

Trend bias:

Downside bias for now in light of concerns of UK economy.

Factors in price action:

• UK’s CPI came in hotter than expectation, tightening BOE rate-cut expectations.
• UK PSNB hit 5 year highs piling pressure on the Chancellor
• Weakness or softness in Eurozone data (PMIs, growth) helps GBP/EUR, but not decisively.

This week:

• UK: PMIs likely move GBP more.
• Eurozone: Flash PMIs, ECB minutes, and sentiment indicators.

Key risks ahead:

• Strong Eurozone surprise or policy clarity from ECB could limit GBP/EUR upside.
• If UK data softens, or risk sentiment worsens, GBP/EUR may drop towards August/July Lows

Trend bias:

Pair finished unchanged last week, continuing its rangebound trend

Factors in price action:

French politics has kept pressure on EUR but weak job numbers also putting pressure on USD

This week:

• Eurozone: ECB Interest Rate Meeting
• US: Inflation numbers in the form of PPI and CPI

Key risks ahead:

• No fireworks expected by the ECB and no rate change expected either. Big surprise would be a dovish tone in ECB statement to hint at future rate cuts. A move to the upside could be seen should we see a set of weak inflation numbers stateside to pile further pressure on rate cut bets and pressure USD

Trend bias:

Sideways, consolidating within a tight range

Factors in price action:

• GBP on the backfoot on continued concerns about brewing stagflation in the economy as well as fiscal concerns that could arise in the upcoming Autumn Budget
• EUR weighed on with political risks in France

This week:

EU CPI on Tuesday

Key risks ahead:

• Likely to see a bigger reaction on the EUR should the EU CPI numbers undershoot and thus raising the prospect of further rate cuts by the ECB this year – EUR weakness if this is the case

Trend bias:

Range-bound with mild GBP upside after last week’s CPI, but EUR resilience limiting further gains.

Factors in price action:

Sterling benefitted from hotter UK inflation, narrowing the perceived policy gap with the ECB. EUR has also found support from softer USD and risk sentiment, leaving cross choppy.

This week:

• Eurozone: Ifo, ECB minutes provide policy tone and French and German CPI

Key risks:

• Weak UK data could reverse post-CPI GBP gains.
• If ECB minutes and CPI numbers has a dovish stance then EUR could soften, lifting the cross.

Trend bias:

Rangebound with slight downside risk as sterling momentum softens.

Factors in price action:

Sterling has held firm, but momentum is slowing as markets weigh the UK inflation outlook and the BOE’s cautious stance. Eurozone data remains soft, but the euro is finding some support as rate-cut expectations moderate. The pair sits close to support levels, keeping risks skewed to the downside if sterling underperforms.

This week:

• UK: July CPI (Wed), Retail Sales (Fri), Flash PMIs (Thu).
• Euro Area: Flash PMIs (Thu), Q2 negotiated wages (Fri).

Key risks ahead:

• Upside UK inflation surprise could lift sterling.
• Weak UK data or euro stabilization risks breaking below the first level of support.

Trend bias

GBPEUR remains rangebound, but the balance of risks is tilted to the downside for sterling.

Factors in price action:

Last week’s UK GDP beat gave the pound a short-term lift, but the bigger picture still points to a stagnating economy, cautious consumer sentiment, and uncertainty ahead of the autumn budget — all of which could limit upside potential. On the euro side, positioning remains constructive, with EUR still the preferred vehicle for USD bearish bets. While eurozone data has been mixed, steady ECB guidance is providing a stable backdrop. GBPEUR has bounced around 2% from year-to-date lows following the BoE’s ‘hawkish cut’ and market repricing of UK rate expectations, but fundamental headwinds for GBP remain.

This week:

• UK data calendar is light; sterling will take cues from broader risk sentiment.
• Eurozone flash PMIs on Thursday are the key macro driver — softer numbers could weigh on EUR, but the bar for disappointment is relatively high.