Published date: 07 July 2025

GBPEUR

GBP/EUR adhered to the downtrend market condition last week, remaining under pressure as expected. PM Starmer refused to back Chancellor Reeves at PMQs, which drove a rally in Gilt yields and a drop in sterling, as markets reacted to the prospect of a new Chancellor who would be far less likely to operate within the tight fiscal constraints imposed by Reeves. This week is all about the tariff deadline on Wednesday.

GBPUSD

GBP/USD retraced within the wider uptrend last week. Starmer refused to back Chancellor Reeves at PMQs, which led to a rise in Gilt yields and a commensurate sterling sell-off. The idea that a new Chancellor would not be as fiscally responsible as Reeves was behind the market move. The dollar is staging a bounce following a solid NFP number last week, as well as some positioning adjustments ahead of Wednesday’s tariff deadline.

EURUSD

Eurozone CPI (inflation) came in at 2%, exactly in line with the central bank’s target. With inflation on target and rates already close to the ‘neutral rate’, Lagarde’s comments at the Sintra ECB forum sounded relatively hawkish and resistant to the need for further cuts. This has been, and should remain, euro supportive. The end of the 90-day tariff reprieve expires this Wednesday, which could prompt some euro volatility if tariffs are reoriented back
towards 50%.