EUR/GBP Outlook: Slightly weaker, but likely to move sideways as the rate trades near recent lows and is below its recent average.
Key drivers:
• Rate gap: The European Central Bank is maintaining a cautious stance on interest rates, while the Bank of England is signaling further rate cuts, which could decrease GBP’s appeal relative to EUR.
• Risk/commodities: Recent surges in oil prices may impact the euro positively, but the overall effect remains limited due to ongoing geopolitical tensions.
• One macro factor: Continued warnings surrounding potential recessions in the UK, driven by new US tariffs, weigh heavily on the pound.
Range: Expect EUR/GBP to hold within its recent range, lacking momentum to test extremes significantly.
What could change it:
• Upside risk: An unexpected positive shift in Eurozone economic data could bolster the euro’s standing against the pound.
• Downside risk: Escalation of geopolitical tensions or negative UK economic reports could further depress GBP.