EUR/GBP slips as PMI divergence and BoE speeches loom

Market overview

The euro–sterling cross began the week under modest pressure, trading near 0.8710, as investors digested a wave of central bank commentary and braced for a heavy slate of PMI surveys. The narrative in global markets remains dominated by monetary policy divergence and softening growth signals, with both the European Central Bank (ECB) and the Bank of England (BoE) walking a fine line between combating persistent inflation and managing weakening domestic demand.

From the eurozone side, ECB officials continue to emphasize caution. ECB Chief Economist Philip Lane is due to speak later today, alongside other policymakers through the week, which could provide further clarity on whether the central bank is leaning toward a more dovish bias after recent signs of disinflation. Eurozone PMIs, due tomorrow, are expected to hold just above the 50 threshold, reflecting stagnation more than expansion. Manufacturing at 50.7, services at 50.6, and composite at 51.1 highlight the bloc’s fragile momentum—barely escaping contraction.

In the UK, the tone has been comparatively resilient. Sterling benefitted last week from stronger retail sales and services sector momentum, underscoring the BoE’s challenge in balancing sticky domestic price pressures against slowing global demand. BoE Governor Andrew Bailey is due to speak tonight, while MPC member Huw Pill is on the calendar for two separate appearances this week. Markets will be watching for any hints that the BoE could lean back toward tightening or at least push back against expectations of aggressive rate cuts in 2026.

The broader backdrop for EUR/GBP is shaped by contrasting expectations: the euro weighed down by weak growth in Germany, stagnant business confidence, and a softening external sector, while the pound enjoys relative support from domestic demand and expectations that the BoE may remain cautious about cutting rates too soon. This divergence is increasingly visible in positioning, with speculative flows leaning in favor of sterling as traders eye relative strength in UK PMI prints compared to the eurozone.

Technical analysis (30-minute chart)

Current technical conditions and main scenario

EUR/GBP is consolidating below the 0.8715 area after retreating from a recent intraday spike. The chart shows the pair testing a cluster of supports aligned with Fibonacci retracement levels. Specifically, the price is hovering around 0.8710, which corresponds with the last swing low, while the 61.8% retracement at 0.8712 acts as near-term resistance turned into support.

The short-term bias points lower, with the break below the ascending trendline drawn from last week’s lows suggesting that bullish momentum is faltering. Price has also slipped beneath the 30-period Weighted Moving Average (WMA), reinforcing the downside tilt.

The main scenario favors continued softness toward the next Fibonacci extensions: 127.2% at 0.8709, followed by 161.8% at 0.8707, and finally 200% at 0.8705. While the range of decline is tight, intraday traders are watching for whether the cross can sustain pressure under 0.8710 to confirm a corrective pullback.

Oscillators

• MACD: The MACD line has crossed below the signal line and remains in negative territory, underscoring bearish momentum. The histogram shows growing downside momentum, consistent with further pressure.
• Money Flow Index (MFI): Currently at 24.5, signaling oversold conditions. This raises the possibility of a near-term pause or minor bounce, though it does not yet negate the bearish structure.
• Bollinger Bands: The pair is pressing against the lower band, another sign of selling pressure. However, the bands are moderately widened, suggesting room for continuation rather than an immediate snapback.

Key levels

• Support: 0.8712 (61.8% Fib), 0.8710 (100% pivot), 0.8709 (127.2%), 0.8707 (161.8%), 0.8705 (200%).
• Resistance: 0.8716 (swing high), 0.8720 (upper Bollinger band), 0.8725 (intraday peak).

A decisive close below 0.8709 would open the path toward 0.8705, confirming further downside correction. Conversely, recovery above 0.8716 would be the first signal that bulls are attempting to reclaim control.

Alternative scenario (Lower probability)

Should EUR/GBP rebound above 0.8716 with strong momentum, the cross could attempt to retest the recent peak near 0.8725. This would require a reversal in intraday sentiment, potentially triggered by dovish commentary from the BoE or stronger-than-expected Eurozone PMIs tomorrow. However, given current technical weakness, this remains a lower-probability outcome.

Fundamental outlook

Eurozone

The euro’s near-term direction hinges on PMI data and ECB commentary. Tomorrow’s manufacturing and services PMIs will test whether the bloc can sustain momentum above the 50 threshold. A downside surprise, particularly in services, would revive fears of stagnation and pressure the euro lower.

ECB officials including Lane and De Guindos are speaking this week, while the ECB Economic Bulletin and Lagarde’s speech on Friday will also be key. Markets are increasingly convinced that the ECB will need to adopt a softer tone heading into Q4 2025, with cuts possible by mid-2026 if growth fails to rebound. The euro is therefore vulnerable to dovish guidance.

United Kingdom

The UK’s economic picture remains more resilient, though not without risks. The focus this week is on the PMI suite—services expected at 53.6, manufacturing at 47.2, and composite at 53.5. Strong services data would bolster the case that the UK economy is weathering global weakness better than peers, reinforcing sterling’s relative strength.

BoE Governor Bailey’s remarks tonight and MPC member Pill’s speeches will also guide expectations. If policymakers lean hawkish, warning that inflation risks remain elevated despite softer global conditions, sterling could find additional support. Conversely, if they adopt a cautious or dovish stance, EUR/GBP may stabilize above 0.8710.

Global drivers

The global macro landscape adds another layer. Fed policy easing has supported risk sentiment, indirectly favoring pro-growth currencies over the euro. Meanwhile, lingering uncertainty around US–China trade discussions and semiconductor restrictions could weigh on risk appetite, though their direct impact on EUR/GBP is more muted compared to GBP/USD or EUR/USD.

Trading implications

The setup for EUR/GBP leans bearish in the near term, with technical indicators aligning with fundamental divergence. The euro faces downward pressure from stagnant growth and cautious ECB rhetoric, while sterling is propped up by relatively robust domestic data and potentially hawkish BoE communication.

• Base case: Continued drift lower toward 0.8707–0.8705, unless Eurozone PMIs surprise to the upside.
• Bullish risk case: A rebound above 0.8716–0.8720 if BoE speeches signal dovishness or if UK services PMI underwhelms.
• Medium-term bias: Sell rallies while below 0.8725, with a preference to fade euro strength against sterling into ECB-driven weakness.

Conclusion

EUR/GBP remains anchored near 0.8710 as traders await a heavy week of data and central bank commentary. The pair’s technical bias points lower, with Fibonacci extensions suggesting room for a controlled pullback toward 0.8705. Oscillators confirm bearish momentum, though oversold readings caution against chasing weakness aggressively without confirmation.

Fundamentally, the euro is weighed down by fragile growth, while sterling benefits from relative resilience in services and hawkish BoE communication risk. This divergence is the core narrative for EUR/GBP: the euro battling stagnation, the pound finding selective strength.

For traders, the strategy remains clear—monitor 0.8709/0.8705 as key downside targets, fade rallies into 0.8716/0.8725 unless fundamentals materially shift, and align with the broader theme of euro underperformance against peers where domestic resilience favors the counterpart.