CFD Trading Rate Euro vs Great Britain Pound (EURGBP)

EUR/GBP continues to hover around the 0.8300 mark with an empty domestic macro calendar for the week ahead, Danske Bank's FX analyst Jens Nærvig Pedersen reports.

UK economy remains stalled

"The UK preliminary PMIs for February came in to the weak side with composite at 50.5 (cons: 50.6, prior: 50.6), services at 51.1 (cons: 50.8, prior: 50.8) and manufacturing at 46.4 (cons: 48.5, prior: 48.3). On employment, January showed the sharpest decline in private sector wage growth since 2020 due to weak demand and rising payrolls costs."

"Price pressures remain elevated due to high wage growth and the impending increase in employers' national insurance contribution (NIC). Following a stagnation in the second half of 2024, the UK economy remains stalled according to the PMI release."

"While a rise in the minimum wage in April will be a supportive combined with easier monetary policy, the rise in employers' NIC remains a risk for the labour market and by extension, growth. This week, keep an eye out for a number of BoE speakers out on the wire."

• EUR/GBP climbs as market sentiment improves after Germany’s conservative election victory.
• Investors focus on the coalition-building process, with strong leadership viewed as essential for driving key fiscal reforms in Germany.
• The Pound Sterling may find support as expectations for a Bank of England rate cut in March ease.

EUR/GBP gains as the Euro finds support following Germany’s conservative victory in the election, aligning with expectations. Preliminary results confirm the win for the Christian Democratic Union (CDU) and its ally, the Christian Social Union (CSU), led by chancellor candidate Friedrich Merz. The currency cross trades around 0.8300 during the early European hours on Monday.

Market attention now shifts to the coalition-building process, with stable leadership seen as crucial for advancing key fiscal reforms. This political outcome comes amid Germany’s economic stagnation, the ongoing conflict in Ukraine, and rising tariff threats from US President Donald Trump. A proposed reform of Germany’s debt brake, which has long hindered investment, is expected to further strengthen the Euro.

Meanwhile, European Central Bank (ECB) policymaker Pierre Wunsch told the Financial Times that while he isn’t advocating for an April pause, rate cuts shouldn’t happen automatically without proper consideration. ECB’s Francois Villeroy de Galhau also suggested the ECB could lower its deposit rate to 2% by summer, according to Reuters.

However, EUR/GBP’s upside may be limited as the Pound Sterling (GBP) draws support from strong UK Retail Sales data for January, reducing expectations of a Bank of England (BoE) rate cut in March. These expectations were already challenged by hotter-than-expected January inflation and robust Average Earnings data through December. 

However, the British Pound could face challenges as the Bank of England (BoE) Governor Andrew Bailey remains concerned over economic prospects this year. Earlier this week, Bailey warned that the economic growth is expected to remain sluggish.

• EUR/GBP steadies as traders adopt caution ahead of Eurozone PMI and UK Retail Sales data.
• The Pound Sterling faced challenges amid ongoing concerns about the UK’s economic outlook.
• The EUR could lose ground as the ECB is expected to deliver quarter-point cuts at every meeting until mid-2025.

EUR/GBP maintains its position following gains in the previous session, trading around 0.8290 during the Asian hours on Friday. The currency cross gained ground as traders remained cautious due to ongoing concerns about the UK’s economic outlook. Bank of England (BoE) Governor Andrew Bailey warned this week that economic growth is expected to remain sluggish, with a softening labor market.

The Pound Sterling (GBP) tried to gain traction after a hotter-than-expected UK Consumer Price Index (CPI) report for January was released on Wednesday. Governor Bailey had already indicated that a short-term inflation spike, driven by volatile energy prices, wouldn’t be persistent.

The EUR/GBP cross may lose ground due to rising expectations of further interest rate reductions from the European Central Bank (ECB). Analysts expect the European Central Bank (ECB) to deliver quarter-point cuts at every meeting until mid-2025. That would bring the deposit rate to 2.0%.

However, ECB Executive Board member Isabel Schnabel stated on Wednesday that the central bank might announce a "halt" in its monetary expansion cycle, as inflation risks have "skewed to the upside" while borrowing costs have significantly eased. Schnabel cautioned that domestic inflation remains "high" and wage growth is "still elevated," particularly amid "new shocks to energy prices."

Meanwhile, traders are closely watching the preliminary HCOB Purchasing Managers’ Index (PMI) data for the Eurozone and Germany, set for release on Friday. On the UK front, attention will be on the upcoming Retail Sales data.

• EUR/GBP softens to around 0.8285 in Wednesday’s early European session. 
• UK CPI inflation rose to 3.0% YoY in January vs. 2.8% expected.
• The dovish stance from the ECB might drag the Euro lower.

The EUR/GBP cross weakens to near 0.8285 during the early European trading hours on Wednesday. The Pound Sterling (GBP) edges higher against the Euro (EUR) after the hotter-than-expected UK Consumer Price Index (CPI) inflation data for January. Later on Wednesday, the Eurozone Current Account will be released. 

Data released by the United Kingdom’s Office for National Statistics on Wednesday showed that the country’s headline CPI rose 3.0% YoY in January, compared to a 2.5% increase in December. This reading came in hotter than the 2.8% expected. The Core CPI, which excludes the volatile prices of food and energy, climbed 3.7% YoY in January versus 3.2% prior, in line with the market consensus of 3.7%. 

Meanwhile, the monthly UK CPI inflation fell to -0.1% in January from +0.3% in December. Markets projected a -0.3% reading. The Pound Sterling holds steady in an immediate reaction to the upbeat UK CPI inflation data.

Slower growth in the Eurozone triggered the expectations of further interest rate reductions from the European Central Bank (ECB), which might weigh on the shared currency. Analysts expect the European Central Bank (ECB) to deliver quarter-point cuts at every meeting until mid-2025. That would bring the deposit rate to 2.0%

• EUR/GBP softens to around 0.8295 in Tuesday’s early European session. 
• UK Unemployment Rate held steady at 4.4% in three months to December; Claimant Count Change came in at 22K in January.
• The dovish mood surrounding the ECB could weigh on the Euro. 

The EUR/GBP cross edges lower to near 0.8295 during the early European trading hours on Tuesday. The Pound Sterling (GBP) strengthens after the UK employment report. Later on Tuesday, investors will keep an eye on the Bank of England’s (BOE) Governor Andrew Bailey speech and Germany’s ZEW Survey for February. 

Data released by the UK Office for National Statistics on Tuesday showed that the country’s ILO Unemployment Rate remained steady at 4.4% in the three months to December. This figure beated the expectations of 4.5% during the reported period. Meanwhile, the Claimant Count Change increased by 22K in January versus -15.1K prior (revised from 0.7K), missing the estimated 10K figure. The GBP remains firm in an immediate reaction to the mixed UK employment report. 

Earlier this month, the BoE cut its benchmark interest rate to 4.50% from 4.75%. The UK central bank policymakers said inflation was likely to hit 3.7% later this year, almost double the BoE's 2% target. This might trigger the BoE to add the word "careful" to its message about a likely "gradual" further reduction in borrowing costs.

On the Euro front, the dovish stance from the European Central Bank (ECB) might drag the Euro (EUR) lower against the GBP. The ECB policymakers remain comfortable with the outlook for three more rate cuts this year, following a 25 basis points (bps) reduction to 2.75% last month.

• EUR/GBP declines as several ECB officials remain comfortable with the outlook for three more rate cuts in 2025.
• The Euro may gain if a ceasefire in Ukraine is agreed upon and gas supplies resume.
• Traders await the upcoming UK labor market and Consumer Price Index inflation data set to be released later this week.

EUR/GBP retraces its recent gains from the previous session, trading around 0.8330 during Monday's Asian hours. The Euro faces downward pressure as several European Central Bank (ECB) officials remain comfortable with the outlook for three more rate cuts this year, following a 25 basis point reduction to 2.75% last month.

However, the downside for EUR/GBP may be limited, as the Euro could find support if a ceasefire in Ukraine is reached and gas supplies resume. Reports indicate that US President Donald Trump and Russian President Vladimir Putin have agreed to begin negotiations to end the conflict, with Trump administration officials set to meet Russian counterparts in Saudi Arabia on Tuesday for talks on a potential peace deal.

Additionally, the EUR/GBP pair faces challenges following strong UK economic data released on Thursday. The UK economy grew by 1.4% year-on-year in Q4 2024, accelerating from an upwardly revised 1.0% in the previous quarter and exceeding market expectations of 1.1%, according to preliminary estimates. This marks the fastest GDP growth since Q4 2022. For the full year 2024, the British economy expanded by 0.9%, up from 0.4% in 2023, driven by a 1.3% increase in the services sector, compared to 0.4% growth the previous year.

Traders will be watching the upcoming UK labor market and Consumer Price Index (CPI) inflation data, due on Tuesday and Wednesday, respectively. Both economic indicators will play a key role in shaping market speculation about whether the Bank of England (BoE) will lower interest rates again at its March meeting. The BoE recently reduced its key borrowing rate by 25 basis points (bps) to 4.5% on February 6.

• EUR/GBP softens to near 0.8325 in Friday’s early European session. 
• UK economy grew by 0.1% QoQ in Q4, beating expectations after recording zero growth in the previous reading. 
• Investors await the preliminary reading of the Eurozone Q4 GDP report, which is due later on Friday. 

The EUR/GBP cross trades in negative territory for the second consecutive day around 0.8325 during the early European session on Friday. The upbeat UK Gross Domestic Product (GDP) data for the fourth quarter (Q4) provides some support to the Pound Sterling (GBP). 

The UK GDP expanded by 0.1% between October and December, surpassing forecasts of a 0.1% decline, the Office for National Statistics (ONS) showed on Thursday. In December alone, GDP rose by 0.4% MoM, compared to 0.1% expansion in November. 

BoE officials have been guiding a cautious approach to interest rate cuts as they are concerned about the persistence of inflationary pressure.  BoE Chief Economist Huw Pill said on Thursday that he “urges caution on interest rate cuts” because the long process of wrestling down inflation is not yet complete. 

On the Euro front, the potential trade war between Europe and the US could drag the shared currency lower. US President Donald Trump unveiled a roadmap on Thursday for charging reciprocal tariffs against every country that imposes duties on US imports. Nonetheless, commerce and economics officials need to study reciprocal tariffs against countries that place tariffs on US goods, and it will not be due until April 1.

Later on Friday, the preliminary reading of the Eurozone GDP for Q4 will be published. The Eurozone economy is estimated to grow 0.9% YoY in Q4. In case of a stronger-than-expected outcome, this could lift the Euro (EUR) against the GBP in the near term. 

• EUR/GBP softens to around 0.8340 in Thursday’s early European session.
• UK GDP rose 0.1% QoQ in Q4 vs. -0.1% expected.
• The German HICP climbed 2.8% YoY in January, as expected. 

The EUR/GBP cross loses momentum to near 0.8340 during the early European session on Thursday. The Pound Sterling (GBP) edges higher after the release of UK growth numbers. The attention will shift to the preliminary reading of the Eurozone Gross Domestic Product (GDP) for the fourth quarter (Q4), which will be published on Friday. 

Data released by the Office for National Statistics (ONS) showed on Thursday that the UK economy expanded 0.1% QoQ in Q4. The reading came in better than the market consensus of a 0.1% decline in the reported period. Meanwhile, the UK GDP grew 1.4% YoY in Q4 versus the 1.1% expected and 0.9% seen in Q3. The GBP trades firm in an immediate reaction to the upbeat UK GDP data.

Bank of England (BoE) Chief Economist Huw Pill said on Thursday that he “urges caution on interest rate cuts” because the long process of wrestling down inflation is not yet complete. Earlier this week, BoE policymaker Catherine Mann said that demand conditions are significantly weaker than before. She had also advocated for a larger interest rate cut in last week’s policy meeting, where the BoE unanimously agreed to lower rates by 25 basis points (bps).

On the Euro front, Destatis on Friday showed that the German Harmonized Index of Consumer Prices (HICP) rose 2.8% YoY in January, compared to the previous reading and the expectations of 2.8%. 

The European Central Bank (ECB) has lowered borrowing costs five times since last June and hinted at more policy easing. Traders expect the ECB to deliver three more interest rate cuts this year amid risks of inflation undershooting the central bank’s target of 2%. The ECB already reduced its Deposit Facility Rate by 25 bps to 2.75% in the January meeting.

While the UK’s growth outlook has suffered a significant setback relative to the more optimistic tone that was prevalent in the market after last July’s general election, the EUR also faces headwinds of its own, Rabobank's FX analyst Jane Foley notes. 

EUR/GBP to trade in the 0.83-0.84 region in the months ahead

"The EU has promised to take countermeasures on the US after President Trump announced tariffs on steel and aluminum. That said, EU politicians are likely poised for further action from Trump which could endanger the region’s fragile growth outlook further."  

"Since US data indicate the presence of a trade surplus with the UK (contrary to ONS data), further tariffs would appear less of a threat for Britain. On balance, we continue to expect a modest outperformance of GBP vs. the EUR this year, though our confidence in GBP has been shaken by the downward revision to the UK growth outlook and last month’s shake-out in the gilt market."  

"Our year end forecast is EUR/GBP0.8150, though we see scope for a prolonged period of range trading in the EUR/GBP0.83-0.84 region in the months ahead."

• EUR/GBP could lose ground as the Trump administration is advancing a plan for reciprocal tariffs.
• The Eurozone faces the risk of reciprocal tariffs since it imposes a 10% duty on US automobile imports.
• The British Pound may struggle following dovish remarks from BoE’s Catherine Mann.

EUR/GBP remains steady after losses in the previous session, hovering around 0.8330 during early European trading hours on Wednesday. Market participants are exercising caution ahead of the release of the US Consumer Price Index (CPI) inflation data later in the day.

The EUR/GBP cross moves little as risk aversion is rising amid escalating geopolitical tensions in the Middle East. Israeli Prime Minister Benjamin Netanyahu warned late Tuesday that the ceasefire would end, and Israel would resume "intense fighting" in Gaza if Hamas does not release hostages by Saturday noon, according to the BBC. Earlier, US President Donald Trump urged Israel to break the ceasefire if hostages were not returned by the weekend.

The Euro may face downside risks as the Eurozone is particularly exposed to potential reciprocal tariffs. Currently, it imposes a 10% tariff on US automobile imports while its own car exports to the United States (US) are subject to only a 2.5% tariff.

Trump administration is advancing an executive action plan to implement reciprocal tariffs, bypassing Congress. The initiative aims to match or exceed tariffs imposed on US exports by other countries and may also address non-tariff barriers such as foreign subsidies, taxes, and regulations. According to the Wall Street Journal, this move could lead to higher US tariffs on goods from Japan, the EU, and China.

EUR/GBP cross could weaken further as the Pound Sterling (GBP) faces headwinds following dovish remarks from Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann. In a Tuesday interview with the Financial Times (FT), Mann indicated a shift in her policy stance, citing significantly weaker demand conditions. She expressed confidence that inflation would align with the BoE’s 2% target later this year while highlighting a “non-linear” decline in employment.

• EUR/GBP appreciates following the BoE Catherine Mann’s comments on late Monday.
• BoE’s Mann stated that UK businesses may struggle to raise prices this year due to job losses and weaker consumer spending.
• The Euro may struggle due to the increased likelihood of deeper ECB rate cuts in the future.

EUR/GBP extends its gains for the second consecutive day, trading around 0.8350 during the European hours on Tuesday. The currency cross appreciated as the Pound Sterling (GBP) lost ground following the remarks from Bank of England (BoE) Monetary Policy Committee member Catherine Mann late Monday.

BoE’s Mann stated that United Kingdom’s (UK) businesses may struggle to raise prices this year as job losses and weaker consumer spending dampen inflation, according to the Financial Times. Mann, who is scheduled to speak again, suggested that corporate pricing power is fading, reducing inflationary pressures. BoE Governor Andrew Bailey's remarks later on Tuesday will also be closely watched. 

On the data front, the British Retail Consortium (BRC) Like-for-Like Retail Sales in the UK increased by 2.5% year-on-year in January 2025, slowing from December’s 3.1% gain but surpassing market expectations of 0.2%. BRC Chief Executive Helen Dickinson noted that while the performance remains strong, its sustainability in the coming months remains uncertain.

On Monday, US President Donald Trump implemented a 25% tariff on steel and aluminum imports, eliminating all exemptions and overriding previous trade agreements with key US allies. Earlier, German Chancellor Olaf Scholz warned that the European Union (EU) could respond “within an hour” if the US proceeded with the proposed tariffs on European goods. This escalation in trade tensions is increasing risk aversion, putting pressure on the risk-sensitive Euro and capping gains for the EUR/GBP cross.

Additionally, the Euro could face challenges amid rising concerns over potential deflationary pressures in the Eurozone due to expected US tariffs have intensified odds of deeper ECB rate cuts, with markets now predicting the deposit rate could fall to 1.87% by December.

• EUR/GBP edges up to 0.8330 on Monday but remains below key resistance.
• Last week's failure to hold above the 100-day SMA continues to weigh on sentiment.

The EUR/GBP pair saw a mild uptick on Monday, rising to 0.8330, but remains under pressure as it struggles to reclaim the 100-day Simple Moving Average (SMA). The inability to hold above this level last week has further dampened sentiment, keeping the broader outlook tilted to the downside.

Technical readings suggest that momentum remains weak despite the recent rebound. The Relative Strength Index (RSI) has climbed to 44, signaling some buying interest but still residing in negative territory. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains flat with green bars, indicating a lack of strong directional bias.

Unless EUR/GBP manages to reclaim the 100-day SMA, currently acting as resistance, further downside risks persist. Immediate support lies at 0.8300, with a break lower exposing 0.8275. On the upside, a decisive move above 0.8350 could provide the bulls with a chance to regain control and target 0.8380.

EUR/GBP daily chart

EUR/GBP loses traction to around 0.8315 in Monday’s early European session.
The BoE said it would be careful about further moves in the face of an expected inflation spike and global economic uncertainty.
The BoE pledges a gradual approach after the quarter-point rate cut

The EUR/GBP cross trades in negative territory near 0.8315 during the early European session on Monday. The concerns about the threat of possible US tariffs on the Eurozone undermine the Euro (EUR). Later on Wednesday, investors await the European Central Bank’s (ECB) President Christine Lagarde speech for fresh impetus. 

US President Donald Trump said on Friday that there would be an announcement later in the week about reciprocal tariffs on all countries that tax imports from the US, but he did not specify which countries would be targeted or if there would be any exemptions. Late Sunday, German Chancellor Olaf Scholz stated that the European Union (EU) can act "in an hour" if Trump slaps threatened tariffs on the bloc. Any signs of an escalating trade war between the US and the Eurozone could drag the shared currency lower. 

Additionally, the rising expectation that the ECB will further cut the interest rates contributes to the EUR’s downside. The ECB policymaker, Boris Vujcic, said that anticipation for three more rate reductions this year are reasonable, even though it will take until the start of the second quarter to know with more certainty if they’ll materialize.

The Bank of England (BoE) Governor Andrew Bailey guided a cautious and gradual rate-cut approach, and he warned that inflation could temporarily rise to near 3.7% in the third quarter of the year before falling back to the 2% path due to higher energy prices. 

• EUR/GBP gains ground due to the increased likelihood of more BoE rate cuts in 2025.
• BoE’s Bailey signaled additional rate cuts with the market expecting two or three more cuts throughout the year.
• Trump described the trade imbalance between the US and the EU as an “atrocity,” insisting that tariffs “will definitely happen.”

EUR/GBP continues its upward trajectory for the fourth consecutive day, trading around 0.8350 during Friday’s Asian session. The pair strengthened as the Pound Sterling (GBP) came under pressure following the Bank of England’s (BoE) 25 basis point interest rate cut on Thursday.

The British Pound may face further downside as BoE Governor Andrew Bailey signaled the likelihood of additional rate cuts this year. Market expectations suggest the central bank could implement two or three more cuts throughout the year.

All nine members of the Monetary Policy Committee (MPC) supported a rate cut, with seven voting for a 25 bps reduction, while two more dovish members pushed for a more aggressive 50 bps cut. The policymakers' urgency in delivering a February rate cut highlights their stance on monetary easing.

However, EUR/GBP’s upside potential could be capped due to increasing risks of US President Donald Trump imposing tariffs on the EU. Trump described the trade imbalance as an “atrocity,” insisting that tariffs “will definitely happen.” In response, EU leaders have pledged to retaliate if the tariffs materialize.

Traders anticipate the European Central Bank (ECB) will continue its gradual approach to lowering interest rates. Last week, the ECB reduced its Deposit Facility rate by 25 basis points (bps) to 2.75%, with officials signaling the likelihood of further cuts this year.

On Wednesday, ECB policymaker and Bank of Portugal Governor Mario Centeno told Reuters that maintaining a downward trajectory for interest rates is "pretty clear." While Centeno did not specify the exact pace of policy easing, he emphasized the need to reach a neutral rate "sooner rather than later."

• EUR/GBP refreshes weekly high near 0.8380 after the BoE reduced its interest rates by 25 bps to 4.5%, as expected.
• Surprisingly, BoE policymaker Catherine Mann supported a larger-than-usual interest rate reduction of 50 bps.
• The BoE sees a temporary uptick in price pressures due to higher energy prices.

The EUR/GBP pair surges and posts a fresh weekly high to near 0.8380 in Thursday’s North American session. The cross strengthens as investors have dumped the Pound Sterling (GBP) after the Bank of England’s (BoE) monetary policy decision in which the central bank reduced its key borrowing rates by 25 basis points (bps) to 4.5%.

Traders had already priced in a 25-bps interest rate decision but with an 8-1 vote split. However, all Monetary Policy Committee (MPC) members supported an interest rate cut and two out of them (Swati Dhingra and Catherine Mann) favored a larger reduction by 50 bps. Investors were shocked after seeing Catherine Mann’s support for a larger-than-usual rate cut as she has been an outspoken hawk.

Apart from an ultra-dovish tone from the MPC, downwardly revised Gross Domestic Product (GDP) forecasts have also weighed on the British currency. BoE’s monetary policy report shows that the central bank has projected a decline in the United Kingdom's (UK) growth rate by 0.1% in the last quarter of 2024 against the 0.3% economic expansion projected in November. The central bank has also revised GDP growth for the current quarter lower to 0.1% from 0.4%.

It appears that the conversion of Catherine Mann’s restrictive stance to ultra-dovish is driven by a weak economic outlook.

Meanwhile, the BoE expects a temporary acceleration in the headline Consumer Price Index (CPI) to 3.7% before returning to the 2% path due to a rise in energy prices.

On the Euro (EUR) front, the outlook of the shared currency has weakened as ECB policymaker and Governor of Bank of Portugal Mario Centeno said in an interview with Reuters on Wednesday that interest rates could move below the neutral rate “sooner rather than later”. ECB Centeno’s dovish remarks were based on the assumption that the Eurozone economy is unable to hold inflation near the central bank's target of 2%.

• EUR/GBP moves higher to near 0.8333 ahead of the BoE’s monetary policy decision at 12:00 GMT.
• The BoE is expected to reduce interest rates by 25 bps to 4.5%.
• ECB Centano sees interest rates falling below the neutral rate.

The EUR/GBP pair rises to near 0.8333 in Thursday’s European session. The cross gains as the Pound Sterling (GBP) weakens across the board ahead of the Bank of England’s (BoE) monetary policy decision, which will be announced at 12:00 GMT.

Traders have fully priced in a 25-basis points (bps) interest rate reduction that will push borrowing rates lower to 4.5%, with an 8-1 vote split. Therefore, the next move in the British currency will be influenced by the monetary policy guidance from BoE Governor Andrew Bailey at the press conference after the interest rate decision.

Andrew Bailey is unlikely to deliver dovish guidance as analysts at Citi expect an uptick in inflation ahead due to expectations of a reversal in energy prices and strong wage growth.

Meanwhile, investors have underpinned the Euro (EUR) against the Pound Sterling but is underperforming its major peers too as European Central Bank (ECB) policymaker and Governor of Bank of Portugal Mario Centano has guided a dovish interest rate outlook. Centano expects the Deposit Facility rate could go below the neutral rate as the economic needs stimulus to hold inflation at 2% target.

On the economic front, Eurozone Retail Sales data for December has come in weaker than expected. Month-on-month Retail Sales declined at a faster pace of 0.2% than estimates of 0.1%. In November, Retail Sales remained flat.

EUR/GBP bounces back after retracing a little over 61.8% from the January 20 high of 0.8474 to near 0.8290. The outlook of the cross is still bearish as it stays below the 50-day Exponential Moving Average (EMA), which trades around 0.8350.

The 14-day Relative Strength Index (RSI) rebounds from 40.00, which suggests a sideways trend ahead until it stays in the 40.00-60.00 range.

A fresh upside move in the pair would appear if it breaks the February 3 high of 0.8361. This scenario would drive the cross towards 38.2% Fibonacci retracement at 0.8380, followed by the round-level resistance of 0.8400.

On the flip side, a downside move by the pair below the February 3 low of 0.8290 will expose it towards the January 2 low of 0.8267 and the December 19 low of 0.8222.

EUR/GBP daily chart

• EUR/GBP weakens to around 0.8320 in Thursday’s early European session. 
• Concerns about Trump’s trade tariffs undermine the shared currency. 
• The BoE is widely expected to cut its key interest rate on Thursday. 

The EUR/GBP cross remains on the defensive around 0.8320 during the early European session on Thursday. The concerns that US President Donald Trump would slap tariffs on goods from the European Union weigh on the Euro (EUR) against the Pound Sterling (GBP). All eyes will be on the Bank of England (BoE) interest rate decision on Thursday. 

Following his announcement of import tariffs on Canada, Mexico, and China on Monday, Donald Trump promised to impose the EU next. The EU intends to retaliate against the US if Trump follows through on his threats to slap tariffs on the bloc. This, in turn, exerts some selling pressure on the shared currency. 

On the GBP front, investors expect the BoE to reduce borrowing costs by a quarter point to 4.50% at its February meeting on Thursday. "The BoE is likely to justify the move, even though inflation remains above (bank) target due to a sluggish economy and a softening in the labor market in recent months," noted Kathleen Brooks, research director at XTB trading group.
 
Market players will closely monitor how the UK central bank assesses any potential inflationary impact from the fiscal reforms announced by the government in October 2024, which include a significant hike in the tax businesses face on payrolls. Sticky inflation might limit BoE Governor Andrew Bailey’s ability to cut rates much further, supporting the GBP. 

GBP has unwound some of the gains it made against the EUR yesterday indicating that the market is not convinced that the pound is a robust hedge against the likelihood of a step up in trade tensions between the EU and the US, Rabobank’s FX analyst Jane Foley notes.

MPC to tweak its language to reflect growing downside risks

“Of course, the 30 days reprieve that the Trump administration granted to both Canada and Mexico yesterday suggest that the President may not be willing to slap harsh tariffs on his allies. While this may have allowed a collective sigh of relief in Europe in addition to Canada and Mexico, Trump’s rhetoric towards the EU has been clear. On Sunday he stated that he would definitely impose tariffs on the EU, describing the bloc’s trade deficit with the US as an atrocity.”

“While GBP has re-priced this year to take account of a poorer UK growth and budget outlook than was expected at the time of last year’s July election, Germany and France have their own structural issues. Our central view remains that EUR/GBP can edge gently lower this year, though the January sell-off has shaken our faith in the pound. Near-term, the BoE policy meeting is also in view.” 

“In addition to the politics, the markets also have the BoE meeting in view this week. The Bloomberg survey shows that all but two forecasters are expecting a 25 bps rate cut from the MPC this week. While we expect the MPC to maintain its gradual approach to policy easing, we anticipate some language tweaks to reflect growing downside risks, which could weigh on the pound in the short-term and push yesterday’s low around EUR/GBP0.8250 out of sight for now.  Rabobank’s foresees four 25bp cuts in 2025.”

• EUR/GBP remains on the back foot for the third successive day on Tuesday. 
• Concerns about Trump’s trade tariffs and dovish ECB weigh on the Euro.
• The downside remains cushioned ahead of the BoE meeting on Thursday.

The EUR/GBP cross turns lower for the third successive day following an Asian session uptick and currently trades around the 0.8300 mark, just above a near one-month low touched the previous day. Moreover, the fundamental backdrop seems tilted in favor of bearish traders and supports prospects for further losses.

The shared currency continues with its relative underperformance in the wake of concerns that US President Donald Trump would slap tariffs on goods from the European Union. This comes on top of the European Central Bank's (ECB) dovish stance, which, to a larger extent, overshadows a rise in the Eurozone Harmonized Index of Consumer Prices (HICP) at an annual rate of 2.5% in January. 

In fact, the ECB lowered borrowing costs by 25 basis points (bps) last Thursday, as expected, and left the door open for more rate cuts by the end of this year. This is seen weighing on the Euro and validates the near-term negative outlook for the EUR/GBP cross. Traders, however, might refrain from placing aggressive bets and opt to wait for the Bank of England (BoE) meeting on Thursday. 

Nevertheless, the aforementioned factors support prospects for an extension of a nearly two-week-old downtrend, suggesting that any attempted recovery might still be seen as a selling opportunity and remain capped. That said, traders might still opt to move to the sidelines in the absence of any relevant macroeconomic data on Tuesday and heading into the key central bank event risk.