EUR/GBP Price Forecast: Sellers retain control as momentum indicators stay bearish
- EUR/GBP trades sideways as traders await the UK local election results and monitor US-Iran peace deal prospects.
- Technically, the cross remains capped below the 100-day and 200-day SMAs, keeping the downside bias intact.
- Momentum indicators remain bearish, with the RSI holding near 40 and the MACD histogram staying in negative territory.
EUR/GBP trades flat on Thursday as traders remain cautious ahead of the UK local election results, while also assessing the prospects of a possible US-Iran deal aimed at ending the war in the Middle East. At the time of writing, the cross is trading around 0.8641, remaining confined within its one-week range as improving global risk sentiment offsets political uncertainty in the United Kingdom.
Polls suggest Prime Minister Keir Starmer’s Labour Party could suffer heavy losses in the local elections. This result could increase political uncertainty in the UK and potentially weigh on the British Pound (GBP).
Meanwhile, the Euro (EUR) is also struggling to gain traction as ongoing tensions in the Middle East and the resulting surge in Oil prices raise expectations that central banks may need to raise interest rates. This could widen the interest rate differential further between the European Central Bank (ECB) and the Bank of England (BoE), currently at 2.15% and 3.75%, respectively, offering support to the British Pound.
Against this backdrop, the broader bias in EUR/GBP remains tilted to the downside, with the technical outlook also pointing to a bearish bias. However, the upcoming UK local election results could weigh on the GBP and limit the downside in the cross.
Technical Analysis:
In the daily chart, EUR/GBP maintains a bearish near-term bias as spot holds under both the 100-day Simple Moving Average (SMA) and the 200-day SMA. The pair’s failure to reclaim these medium- and long-term averages suggests rallies are likely to be capped for now, while the Relative Strength Index (RSI) around 40 and a slightly negative Moving Average Convergence Divergence (MACD) histogram hint that downside momentum, although not extreme, continues to favor sellers.
On the topside, initial resistance emerges at the 100-day SMA near 0.8687, followed by the 200-day SMA around 0.8703, where a daily close above would be needed to soften the current bearish structure. Until those levels are reclaimed, the technical tone favors further consolidation or mild downside, with traders likely to sell into rallies while momentum oscillators remain subdued. On the downside, the next notable support emerges at the psychological level of 0.8600, where a break below could trigger further losses.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.