Bias: Bullish-to-range-bound — GBP/EUR sits above its 90-day average and in the upper half of the recent three-month range.
Key drivers:
- Rate gap: The BoE is seen trimming its pace of rate cuts later, while the ECB is expected to keep policy on hold, narrowing the gap and supporting Sterling if UK growth holds up.
- Risk/commodities: Oil remains elevated and volatile; higher energy costs weigh on eurozone activity and can tilt modestly in favor of GBP, especially if UK energy dynamics remain comparatively resilient.
- One macro factor: Eurozone inflation easing toward the target supports the ECB’s neutral stance and helps EUR stay steady amid policy expectations.
Range: GBP/EUR is likely to drift within the three-month range, with a tendency to test the upper end but not break decisively.
What could change it:
- Upside risk: A stronger-than-expected UK data release or a softer BoE rate path could lift GBP.
- Downside risk: Weaker UK data or firmer eurozone data could push GBP lower.
