EUR/GBP remains conflicted ahead of Eurozone sentiment data
- EUR/GBP remains anchored below psychological resistance at 0.8400.
- Eurozone sentiment data for May and comments from ECB speakers are in focus.
- British Pound remains supported by the latest CPI and Retail Sales print.
The Euro (EUR) remains conflicted against its British Pound (GBP) counterpart on Monday, struggling to build sustained momentum despite an early attempt to recover last week’s losses.
Following United States (US) President Donald Trump’s announcement to delay the implementation of tariffs on European imports until July 9, the Euro found some support, helping EUR/GBP limit downside pressure.
However, the pair remains capped below the 0.8400 mark at the time of writing, as the British pound continues to draw strength from steady UK fundamentals and relatively firm inflation expectations.
Trump had initially proposed a sweeping 50% tariff on all European Union (EU) goods, but confirmed the extension following a call with European Commission President Ursula von der Leyen, who stated that “Europe is ready to advance talks swiftly and decisively.”
Additionally, comments from European Central Bank (ECB) President Christine Lagarde assisted in limiting further losses. Lagarde emphasized the need to strengthen the Euro’s global standing amid growing geopolitical and economic uncertainty.
Lagarde stated, “The international role of the Euro is not something we can take for granted — it must be earned. And that means building trust through deeper capital markets, stronger institutions, and a commitment to economic security.”
Despite the Euro's attempt to benefit from Monday’s events, EUR/GBP remained capped below the 0.8400 handle, as the British pound continued to draw support from firm domestic data and relatively stable inflation expectations.
EUR/GBP prepares for Eurozone sentiment data
On Tuesday, the Eurozone will release a series of key sentiment indicators for May, including Business Climate, Consumer Confidence, Economic Sentiment, Industrial Confidence, and Services Sentiment.
These reports will offer valuable insight into how businesses and consumers are perceiving economic conditions across the region.
For EUR/GBP, this data could be pivotal in determining whether the Euro can sustain its recent strength against the British Pound. Stronger-than-expected readings would likely reinforce confidence in the Eurozone’s resilience, potentially delaying further ECB rate cuts and providing a lift to the single currency.
On the other hand, weaker sentiment figures may weigh on the Euro, particularly if ECB policymakers such as Klaas Knot and Joachim Nagel adopt a dovish tone in their remarks scheduled later in the day. In such a scenario, EUR/GBP bears may regain control, especially if UK fundamentals remain comparatively firm and continue to support the Pound.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro 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 then its currency will gain in value 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.
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