CFD Trading Rate Euro vs Great Britain Pound (EURGBP)

• EUR/GBP could find primary resistance around the psychological level of 0.8400.
• The currency cross is testing nine-day EMA support, suggesting a potential weakening of short-term price momentum.
• UK Gross Domestic Product declined by 0.1% following a 0.4% increase in December.

EUR/GBP gains ground after registering losses in the previous two sessions, trading around 0.8380 during the early European hours. The currency cross appreciates following the United Kingdom's (UK) Gross Domestic Product (GDP) released on Friday.

The Office for National Statistics (ONS) reported that the UK economy shrank in January, with Gross Domestic Product (GDP) declining by 0.1% following a 0.4% increase in December. Markets had anticipated a 0.1% expansion for the period.

A technical examination of the daily chart indicates the price of the currency cross testing nine-day Exponential Moving Average (EMA) support, suggesting a potential weakening of short-term price momentum.

However, the 14-day Relative Strength Index (RSI), a key momentum indicator, remains above 50, indicating a bullish bias is still intact. However, the EUR/GBP cross remains above the 50-day, reinforcing medium-term price momentum.

On the upside, the EUR/GBP cross could explore the area around the psychological level of 0.8400, followed by the two-month high of 0.8449, met on March 11.

The EUR/GBP cross tests immediate support at the nine-day EMA of 0.8374 level, followed by the 50-day EMA at 0.8337 level. A break below this level could weaken the medium-term price momentum and lead the currency cross to navigate the region around the three-month low at 0.8242 level, recorded on February 28.

EUR/GBP: Daily Chart

• EUR/GBP could face further depreciation as the Euro weakens amid an escalating US-EU trade war.
• President Trump threatened a 200% tariff on all European wines and champagne, raising global market concerns.
• UK economy is projected to have grown modestly by 0.1% in January, down from the 0.4% expansion seen in December.

EUR/GBP holds ground after registering losses in the previous two consecutive sessions, trading around 0.8380 during the Asian hours on Friday. The currency cross faced challenges as the Euro (EUR) depreciated against its peers amid an escalating trade war between the United States and the European Union (EU). US President Donald Trump threatened a 200% tariff on all European wines and champagne during Thursday’s early US session, sparking concerns in global markets.

Traders are expected to closely monitor Germany's February Harmonized Index of Consumer Prices (HICP), along with the UK’s January Gross Domestic Product (GDP) and factory data, set for release later in the day.

European Central Bank (ECB) policymaker and Bundesbank President Joachim Nagel warned that US tariffs on imported goods could push Germany, Europe’s largest economy, into another recession, worsening its economic struggles. "We are in a world with tariffs, so we could expect maybe a recession this year if the tariffs take effect," Nagel said on Thursday.

Traders will closely watch the UK GDP figures as the Bank of England (BoE) has expressed concerns over the economic outlook. In its February policy meeting, the BoE revised its GDP growth forecast for the year to 0.75%, down from the 1.5% projected in November.

The UK economy is projected to have grown modestly by 0.1% in January, slowing from the 0.4% expansion recorded in December. Meanwhile, monthly factory data is expected to show a decline for the first month of 2025.

• EUR/GBP declines as the Euro struggles after Trump threatened additional tariffs in response to EU's retaliatory measures against the US.
• Investor caution persists as the Greens party’s Brantner refrains from committing to support Germany’s plans for increased borrowing.
• The UK RICS Housing Price Balance fell to 11% in February, marking its second consecutive decline.

EUR/GBP continues its losing streak for the second straight day, trading near 0.8390 during European hours on Thursday. The currency cross remains under pressure as the Euro (EUR) struggles amid deteriorating market sentiment following US President Donald Trump’s additional tariff threats in response to the European Union’s (EU) retaliatory measures against the United States (US).

Investor caution persists as Germany’s plans for increased state borrowing face fresh obstacles. On Wednesday, Franziska Brantner, co-leader of the Greens party, refrained from committing to a deal, while the far-left party filed another legal challenge.

Meanwhile, election winner Friedrich Merz is pushing to implement debt reforms and create a €500 billion ($545 billion) infrastructure fund before the current parliament dissolves. However, the success of these initiatives depends on securing support from the Greens and overcoming potential legal challenges, according to Reuters.

Adding to concerns, European Central Bank (ECB) policymaker and Bundesbank President Joachim Nagel warned in a BBC interview on Thursday that US trade tariffs on the EU could drive Germany into recession this year.

UK Prime Minister Keir Starmer remains optimistic that Britain can avoid US tariffs on steel and aluminum, advocating for a "pragmatic approach" in negotiations while keeping all options open. Unlike the EU, which has swiftly retaliated against the tariffs, the UK has reaffirmed its commitment to trade discussions with Washington.

Meanwhile, the UK’s 10-year gilt yield surged to 4.68%, the highest level in two months, as expectations mounted that the Bank of England (BoE) will maintain elevated interest rates for an extended period. Traders now anticipate only a 52 basis point (bps) rate cut in 2025, scaling back previous forecasts for more aggressive easing. Investors will be closely watching Friday’s UK monthly GDP data for January, which could offer further insights into the country’s economic outlook.

• EUR/GBP dips amid rising confidence that the BoE will maintain higher interest rates for an extended period.
• BoE policymakers signaled that the process of easing monetary policy restrictiveness would be gradual.
• The Franziska Brantner-led German Green Party may support the approval of a defense spending deal.

EUR/GBP halts its seven-day winning streak, trading around 0.8430 during the European hours on Wednesday. The currency cross weakens as the Pound Sterling (GBP) strengthens, driven by growing trader confidence that the Bank of England (BoE) will keep interest rates higher for longer.

Market expectations for a prolonged restrictive monetary policy stance by the BoE are supported by strong wage growth in the United Kingdom (UK), which continues to fuel inflation in the services sector. Last week, four BoE policymakers, including Governor Andrew Bailey, told the Parliamentary Treasury Committee that unwinding monetary policy restrictiveness would be gradual, as inflation persistence is unlikely to subside on its own.

However, the EUR/GBP cross appreciated as the Euro (EUR) outperforms its peers, buoyed by optimism that the Franziska Brantner-led German Green Party will support the approval of a defense spending deal set for discussion on Thursday. Earlier, German leaders agreed to ease the borrowing cap, known as the “debt brake,” and establish a €500 billion infrastructure fund to bolster defense spending and stimulate economic growth.

Germany’s fiscal plans have also led traders to reconsider expectations for the European Central Bank (ECB) to implement two additional rate cuts by the summer. ECB policymaker and Bank of Finland Governor Olli Rehn noted that forecasts and core inflation indicators suggest inflation is on track to align with the 2% target.

• EUR/GBP extends its winning streak as the European Union considers boosting defense spending through joint borrowing and EU funds.
• Germany’s Green Party may negotiate a defense spending agreement with the expected ruling coalition, led by Chancellor-in-waiting Friedrich Merz.
• The Pound Sterling found support after BoE’s Mann dismissed the need for a “gradual and cautious” approach to monetary easing.

EUR/GBP continues its winning streak that began on March 3, trading around 0.8440 during the European hours on Tuesday. The currency cross continues to strengthen as the European Union (EU) explores ways to bolster defense spending through joint borrowing, EU funds, and an expanded role for the European Investment Bank (EIB), with key decisions expected by June.

Germany’s Green Party is open to negotiations and aims to reach an agreement by the end of the week in its dispute over defense spending with the country’s likely next ruling coalition, led by Chancellor-in-waiting Friedrich Merz. “Of course, we are ready to negotiate,” said Green Party co-leader Franziska Brantner in a Bloomberg TV interview on Tuesday.

Earlier, German leaders agreed to relax the borrowing limit, known as the “debt brake,” and establish a €500 billion infrastructure fund to boost defense spending and drive economic growth. Meanwhile, Italy is set to propose a European guarantee scheme that could unlock up to €200 billion ($216.48 billion) in investments for the defense and aerospace industries, according to Reuters.

These large-scale economic stimulus measures have prompted traders to scale back expectations of two additional interest rate cuts by the European Central Bank (ECB) this year, as the potential inflationary impact could limit the scope for further easing.

However, the upside for the EUR/GBP cross may be capped as the Pound Sterling (GBP) remains supported by last week’s cautious remarks from Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann. She dismissed the need for a “gradual and cautious” approach to monetary easing, citing rising global economic volatility.

Before Mann’s comments, four BoE officials, including Governor Andrew Bailey, had advocated for a measured approach to reducing monetary policy restrictiveness, emphasizing that inflation persistence is unlikely to ease “on its own accord.”

Last week’s headlines centered around Trump’s tariffs, US growth risks, Ukraine, European defense and German fiscal policy, Rabobank's FX analyst Jane Foley reports. 

EUR/GBP to hold around the 0.84 area in the weeks ahead

"China, Canada, and Japan managed to steal a little of the limelight, but amid the fast-moving news-flow, there was very little space to digest the latest UK events. For UK Chancellor Reeves, this was probably both good and bad. The attention she received at the start of the year in response to the wobble in the gilts market was no doubt unwelcome." 

"That said, last week’s news that the government is lining up welfare cuts ahead of her March 26 Spring Statement was likely very deliberately timed to ensure that the event itself would create a minimum of market reaction. Assuming that the Labour government can win the support of its own MPs for welfare reform, the market is likely to welcome some fiscal consolidation from the UK." 

"That said, the dynamics for EUR/GBP have been altered by the news from the German coalition-to-be last week. As a result we have adjusted our 12-month forecast for EUR/GBP higher across the board and now have an end-of-year forecast of 0.83 from a previous estimate of 0.8150. We expect EUR/GBP to hold around the 0.84 area in the weeks ahead"

EUR/GBP rose sharply last week fuelled by the sell-off in European fixed income, which was triggered by the outlook of a fundamental change in fiscal spending in Germany, lending support to the broad EUR, Danske Bank's FX analysts Kristoffer Kjær Lomholt and Filip Andersson report. 

The cross is thus back to trading close to the 0.84 mark

"While fiscal worries in the UK are taking a back seat, for now, GBP FX tends to perform poorly when uncertainty is high and volatility is elevated. The cross is thus back to trading close to the 0.84 mark." 

"While we maintain our strategic bearish view on EUR/GBP fuelled by a hawkish BoE and the expectation of improving UK macro data, we stress that if the heightened volatility and euro-positive story continues, the move higher could extend further in the near-term." 

"This week, we look out for monthly UK GDP estimate for January, but more importantly further news regarding the fiscal spending plans in Germany, which are expected to be voted through parliament possibly already this week. We target the cross at 0.81 in 12M."

• EUR/GBP rises sharply to near 0.8400 as the Euro outperforms amid Germany’s debt restructuring plan.
• The ECB reduced its interest rates by 25 bps on Thursday, as expected.
• BoE Mann sees the need for a swift policy-easing cycle due to global market uncertainty.

The EUR/GBP pair climbs to near the key level of 0.8400 in Friday’s North American session. The asset strengthens as the Euro (EUR) outperforms its peers, with traders paring European Central Bank (ECB) dovish bets on expectations that German debt restructuring would accelerate inflationary pressures. Such a scenario would force the ECB to pause the monetary policy-easing cycle in the April meeting.

This week, German leaders, including likely new Chancellor Frederich Merz, have agreed to create a 500 billion Euro infrastructure fund and debt reforms.

While ECB President Christine Lagarde believes that it is to early to predict the impact of German monetary stimulus on the Eurozone economy. Lagarde said in the press conference after the policy decision on Thursday that increased defense and infrastructure spending is still a "work in progress" and the ECB "needs time" to understand the impact.

On Thursday, the ECB reduced its Deposit Facility rate by 25 basis points (bps) to 2.5%, as expected, but refrained from guiding the interest rate outlook. This was the fifth interest rate cut by the ECB in a row.

Meanwhile, the Pound Sterling (GBP) underperforms the Euro as Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann argued that the economy needs strong stimulus through swift policy-easing due to due to “substantial volatility” coming from financial markets, especially from “cross-border spillovers”.

Contrary to BoE Mann, other officials, including Governor Andrew Bailey, favored a gradual monetary expansion cycle as inflationary pressures are unlikely to squeeze out on their own accord while testifying before Parliament’s Treasury Committee.

• EUR/GBP climbs to around 0.8380 in Thursday’s early European session. 
• The ECB is widely expected to cut the interest rates, bringing the bank's benchmark deposit rate to 2.5% on Thursday. 
• BoE’s Ramsden said the central bank should keep a “careful and gradual” approach to monetary policy amid uncertainty. 

The EUR/GBP cross trades in positive territory for the fourth consecutive day around 0.8380 during the early European session on Thursday. The easing fear of trade tariff plans from US President Donald Trump provides some support to the Euro (EUR). The European Central Bank (ECB) interest rate decision will take center stage later on Thursday. 

The US announced the launch of tariffs on major trading partners, which are expected to cause a slowdown in global sectors, including automotive, but the duties might yet be pared back. Traders will closely monitor the developments surrounding further tariff plans. Any signs of escalating trade tensions could exert some selling pressure on the shared currency. 

The ECB is expected to cut interest rates at its March meeting on Thursday. Markets have priced in a quarter-point rate cut from the ECB on Thursday and another half-point in cuts by the end of the year. Analysts at Rabobank said the EUR’s upside was “in part due to expectations that room for further ECB rate cuts will be more confined,” with the reforms and higher spending bringing the “promise of an uplift in economic growth.”

The Bank of England (BoE) governor Andrew Bailey thinks a renewed bout of inflation is nothing to worry about. Meanwhile, BoE Deputy Governor Dave Ramsden said that the UK central bank should keep a “careful and gradual” approach to the monetary policy amid uncertainty over the labor market and global trade. The bets of a gradual monetary expansion approach are supported by elevated United Kingdom (UK) wage growth, which could keep inflationary pressures persistently higher.

• EUR/GBP trades on a stronger note near 0.8255 in Tuesday’s early European session.
• Ukraine peace plan and hotter-than-expected Eurozone HICP inflation data lift the Euro.
• The BoE is anticapted to follow a careful and gradual policy-easing approach.

The EUR/GBP cross trades in positive territory for the second consecutive days around 0.8255 during the early European session on Tuesday. The Euro (EUR) strengthens against the Pound Sterling (GBP) after the report that France and the United Kingdom (UK) have proposed a one-month truce in Ukraine.

French President Emmanuel Macron and his foreign minister said that France is proposing a partial one-month truce between Russia and Ukraine, suggesting European efforts to bolster support for Kyiv accelerate in the face of uncertain US backing.

Additionally, the hotter-than-expected February flash Harmonized Index of Consumer Prices (HICP) data from the Eurozone provides some support to the shared currency. The Eurozone HICP rose 2.4% YoY in February, compared to 2.5% in January. This figure came in above the consensus of 2.3%.

On the GBP’s front, the rising bets that the Bank of England (BoE) will follow a moderate policy-easing cycle might boost the GBP and create a headwind for EUR/GBP. BoE Deputy Governor Dave Ramsden said that the UK central bank should keep a “careful and gradual” approach to the monetary policy amid uncertainty over the labor market and global trade.

• EUR/GBP edges higher after reports that France and the UK have proposed a one-month truce in Ukraine.
• French President Emmanuel Macron stated that the ceasefire aims to halt all air and sea conflicts.
• The British Pound remains supported as the BoE is expected to take a cautious approach to monetary easing.

EUR/GBP pauses its three-day losing streak, hovering around 0.8260 during Monday’s Asian session. The currency cross strengthens as the Euro (EUR) gains traction following reports that France and the United Kingdom (UK) have proposed a one-month truce in Ukraine.

In an interview with France's Le Figaro on Sunday night, French President Emmanuel Macron stated that France and Britain are advocating for a one-month ceasefire in Ukraine to halt all air and sea conflicts, as well as attacks on energy infrastructure. This announcement followed crisis talks in London, where European leaders reaffirmed their support for Kyiv, pledged increased security spending, and discussed forming a coalition to enforce any potential truce.

The Euro also found support from stronger-than-expected February flash Harmonized Index of Consumer Prices (HICP) data from Germany, released on Friday. Despite this higher inflation reading, the European Central Bank (ECB) is still expected to maintain its easing stance in Thursday’s policy meeting. Investors now turn their attention to the Eurozone’s HICP inflation data, set for release later today.

However, EUR/GBP’s upside could be limited as the Pound Sterling (GBP) remains supported by expectations that the Bank of England (BoE) will adopt a more measured approach to monetary easing compared to other major central banks.

Market sentiment suggests the BoE may proceed cautiously due to strong wage growth, with Average Earnings (excluding bonuses) in the three months ending December rising to 5.9%—the highest level since April 2024.

• EUR/GBP gains traction as worries over potential US tariffs on the UK intensify.
• President Trump signaled the potential imposition of trade tariffs on the UK after meeting with PM Keir Starmer late Thursday.
• The Euro comes under selling pressure as risk aversion rises amid renewed US-EU trade tensions.

EUR/GBP attracts buyers after two consecutive sessions of losses, trading around 0.8260 during Asian hours on Friday. The currency pair’s upside could be linked to a weakened Pound Sterling (GBP) following US President Donald Trump’s meeting with UK Prime Minister Keir Starmer late Thursday. Trump swiftly announced the possibility of trade tariffs on the UK unless the terms of a trade deal with the US—currently ambiguous—are agreed upon within an unspecified timeframe.

On Wednesday, UK Chancellor of the Exchequer Rachel Reeves expressed confidence that trade and investment between the US and UK would remain stable despite the new US administration. She noted, “The last time President Trump was in the White House, trade and investment flows between our two countries increased, and I've got every confidence that that can happen again.”

The British Pound may have faced additional pressure after Bank of England (BoE) Monetary Policy Committee Member Swati Dhingra signaled support for more aggressive monetary easing, favoring four rate cuts. Dhingra explained that while the media often associates "gradual" with 25 basis points (bps) per quarter, maintaining this pace throughout 2025 would still leave monetary policy excessively restrictive by year-end.

However, the EUR/GBP cross saw a pullback as the risk-sensitive Euro faced selling pressure amid heightened risk aversion following renewed US-EU trade tensions. US President Donald Trump suggested imposing “reciprocal” tariffs on the European Union (EU) as early as April.

During a press conference on Wednesday, Trump announced plans to implement a 25% tariff on “cars and other things” from the Eurozone “very soon.” In response, a European Commission (EC) spokesperson asserted, “The EU will react firmly and immediately against unjustified barriers to free and fair trade.”

• EUR/GBP weakens as President Trump warns of 25% tariffs on the European Union
• The EU vowed to respond against Trump’s proposed tariffs.
• BoE’s Swati Dhingra emphasized the limits of central bank policy in tackling trade-related supply shocks.

EUR/GBP extends its losses for the second consecutive day, trading around 0.8270 during Asian hours on Thursday. The currency cross remains under pressure due to a weakened Euro (EUR) following threats from US President Donald Trump to impose 25% tariffs on the European Union (EU).

Late Wednesday, President Trump reaffirmed his intention to enforce 25% tariffs on Canada and Mexico and announced plans to add the EU to the list of nations facing trade penalties for exports to the United States (US).

In response, the EU pledged to react “firmly and immediately” to these “unjustified” trade barriers, signaling its readiness to retaliate swiftly against the proposed levies. These escalating trade tensions could exacerbate the Eurozone’s economic slowdown and further weigh on the EUR’s performance against its peers.

Meanwhile, Bank of England (BoE) Monetary Policy Committee Member Swati Dhingra highlighted on Wednesday the limitations of central bank policy in addressing trade-based supply shocks. Dhingra noted that if global economic fragmentation proceeds in an orderly fashion, monetary policy interventions may not be necessary. However, in a scenario where external supply shocks become more frequent, having an independent monetary authority with a clear inflation target becomes crucial.

Traders have already priced in two interest rate cuts by the BoE for the year. Nevertheless, Dhingra’s earlier comments suggested she supports more aggressive easing, favoring over four rate cuts. She stated that while the media often interprets the term “gradual” as 25 basis points (bps) per quarter, maintaining this pace throughout the rest of 2025 would still leave monetary policy in an excessively restrictive position by year-end.

• EUR/GBP remains under pressure as Germany’s GfK Consumer Confidence Survey dropped to -24.7 for March. 
• The Euro may face further headwinds with the ECB widely expected to cut interest rates next week. 
• UK Prime Minister Keir Starmer has announced plans to raise defense spending to 3% of the country’s economic output.

EUR/GBP posts losses after registering gains in the previous two successive days, trading around 0.8300 during the early European hours on Wednesday. The currency cross holds losses following the release of Germany’s GfK Consumer Confidence Survey, which fell to -24.7 for March 2025, down from a slightly revised -22.6 in the prior period and below market expectations of -21.4. This represents the lowest level since April 2024, highlighting ongoing challenges for the new government, such as persistent cost pressures, political uncertainty, and a surge in corporate bankruptcies.

Traders closely monitor remarks from European Central Bank (ECB) officials ahead of next week’s policy meeting, where the ECB is widely expected to cut interest rates for the fifth consecutive time.

On Tuesday, ECB board member Isabel Schnabel argued that subdued growth should not be automatically interpreted as evidence of restrictive policy, according to a report from Reuters. Schnabel noted that "the natural rate of interest in the Euro area has increased appreciably over the past two years" and suggested that "the nature of the inflation process is likely to have changed lastingly."

ECB policymaker Martins Kazaks expressed support for continued rate cuts, emphasizing the need to approach them step by step. Meanwhile, ECB’s Joachim Nagel indicated that further rate cuts remain possible if inflation continues to ease toward the 2% target.

In the United Kingdom (UK), Prime Minister Keir Starmer has unveiled plans for a significant boost in defense spending, aiming to increase it to 3% of the nation’s economic output over the next decade, according to Bloomberg. This move comes as European governments work to strengthen their security amid uncertainty over US support under Donald Trump’s leadership.

Addressing the House of Commons on Tuesday, Starmer described the initiative as “the biggest sustained increase in defense spending since the end of the Cold War.” Ahead of his upcoming visit to Washington later this week, he confirmed that the initial funding for this increase would come from cuts to overseas development spending, with no plans to raise taxes or increase borrowing.

• EUR/GBP holds its gains following Germany’s Gross Domestic Product data released on Tuesday.
• Germany’s economy shrank by 0.2% QoQ in Q4 of 2024, compared to a 0.1% expansion in the third quarter.
• BoE Monetary Policy Committee member Swati Dhingra advocates for a swift easing of policy restrictiveness to stimulate consumption.

EUR/GBP continues its upward momentum for the second consecutive day, hovering around 0.8290 during European trading hours. The currency cross remains stable following the release of Germany’s Gross Domestic Product (GDP) data on Tuesday.

Germany’s economy contracted by 0.2% quarter-on-quarter in the fourth quarter of 2024, aligning with preliminary estimates and following a 0.1% expansion in the previous quarter. This downturn was largely driven by a negative contribution from net trade, with exports falling 2.2% while imports rose by 0.5%. On an annual basis, the economy shrank by 0.2% in Q4, confirming initial projections and marking the sixth straight quarter of decline.

The EUR/GBP cross remains under pressure due to the Euro’s (EUR) weakness following Germany’s federal election, where no single party secured a clear majority — a situation that could further complicate growth prospects in the already struggling economy.

Friedrich Merz, leader of the Christian Democratic Union of Germany (CDU), is poised to become Germany’s Chancellor after winning the largest share of votes. However, forming a coalition government is expected to be challenging and could delay policy implementation.

Investors are now looking for fresh signals on the Bank of England’s (BoE) monetary policy direction for the year ahead. Earlier this month, the BoE lowered its key borrowing rate by 25 basis points (bps) to 4.5%, indicating a gradual approach to policy easing.

However, BoE Monetary Policy Committee (MPC) member Swati Dhingra has advocated for a more aggressive monetary expansion, citing weak demand. In her speech at Birkbeck on Monday, Dhingra expressed concern that the current pace of rate cuts—interpreted as 25 bps per quarter—could still leave monetary policy overly restrictive by the end of 2025.

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%