Published date: 27 January 2025

GBPEUR

GBP/EUR spent most of the week in an incredibly tight price range, enjoying robust technical support at 1.1833. Solid services/manufacturing PMI last week prompted some sterling upside, and medium-term dynamics should continue to be more supportive of the pound than the single currency. Thursday’s ECB meeting and German inflation are in focus this week, with very little scheduled UK data.

GBPUSD

GBP/USD volatility reduced significantly from the prior week. UK inflation, released last Wednesday, came in below expectations at 2.5%, helping calm Gilt markets and provide some respite for sterling and Rachel Reeves. This week, Tuesday morning’s unemployment data and Friday’s PMI data are the key releases. In the US, President Trump’s early policy direction is a key focus for markets.

EURUSD

EUR/USD is enacting a reversal to the upside, forcing out some speculative short positions as price action pushes smartly higher from the 1.0350 technical level. Solid Eurozone PMI data – a nice surprise out of Germany (!) – acted as a catalyst for the euro upside. However, the real crunch has been felt in the dollar, as Trump’s bark has been worse than his bite on tariffs so far, prompting some dollar bulls to retreat. The Fed is not expected to cut rates at Wednesday’s FOMC meeting, in contrast to a likely cut from the ECB the following day.