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Euro consolidates losses against the British Pound despite high inflation figures

  • EUR/GBP inches up from 0.8639 lows but remains capped below 0.8650 on Tuesday.
  • The Euro has been little moved by the hot Eurozone inflation levels released earlier on the day.
  • The Pound maintains a bid tone as UK politics jump into the back seat.

The Euro (EUR) remains vulnerable against the British Pound (GBP) on Tuesday, capped below 0.8650, consolidating losses from the previous two trading days. The hotter Eurozone inflation figures have failed to provide any significant support to the Euro, as they do not alter the view that the European Central Bank (ECB) will hike rates next week.

Preliminary data released by Eurostat on Tuesday revealed that the Eurozone Harmonised Index of Consumer Prices (HICP) accelerated to a 3.2% year-on-year (YoY) growth in May, in line with market expectations, from 3.0% (YoY) in April. Likewise, the core HICP rose to a one-year high of 2.5% in the 12 months to May, up from 2.2% in April, above market expectations of a 2.4% increase.
The data confirms the inflationary impact of the energy shock stemming from Iran’s war, while the increase in core inflation suggests that price pressures are spilling through the broader economy, adding pressure on households and businesses. This practically confirms a 25-basis-point rate hike at next week’s monetary policy meeting.

The Sterling, on the other hand, is showing some strength as Prime Minister Keir Starmer seems to have withstood calls to resign, following the disastrous result in May’s local elections, which eases concerns about a void of power, at least for now.

Earlier on Tuesday, Consumer Credit eased to GBP 1.86 billion in April from the upwardly revised GBP1.90 billion in March, with Mortgage approvals increasing to 65.94K from 63,97 K in March against market expectations of a moderate decline. Net Lending to Individuals fell to GBP 6.2 billion in April from GBP 8.7 billion in March. The Pound, however, was little moved after these figures.

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British Pound nudges higher as traders await progress on Middle East peace talks

  • GBP/USD posts modest gains near 1.3460 in Tuesday’s Asian session. 
  • The potential upside for the pair might be limited as the status of Iran’s peace talks remains unclear. 
  • US ISM Manufacturing PMI rose to 54 in May, stronger than expected.  

The GBP/USD pair trades in positive territory around 1.3460 during the Asian trading hours on Tuesday. However, renewed tensions in the Middle East might cap the upside for the major pair as Iran has reportedly withdrawn from negotiations with the US. Traders will closely monitor the developments surrounding Middle East peace talks.

Iran’s state media said Tehran on Monday had suspended talks over Israel’s actions in Lebanon. Separately, US President Donald Trump stated that he believes an agreement to reopen the Strait of Hormuz and extend the ceasefire with Iran is reachable “over the next week.” Mixed signals and uncertainty in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair in the near term. 

Data released by the Institute for Supply Management (ISM) on Monday showed that the US Manufacturing Purchasing Managers’ Index (PMI) rose to 54 in May from 52.7 in April. This figure came in better than the market expectation of 53.0.

On the UK’s front, BoE governor Andrew Bailey said on Friday that the UK central bank is in no rush to raise interest rates while the outcome of the Iran war remains uncertain and the UK’s growth rate stays weak. Money market futures now imply 32 basis points (bps) of tightening this year, one quarter-point hike, and roughly a 30% chance of a second, according to Reuters. 

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Euro holds losses against British Pound after Germany’s Retail Sales data

  • EUR/GBP softens to around 0.8655 in Monday’s early European session. 
  • German Retail Sales declined by 0.3% MoM in April. 
  • BoE’s Bailey signalled there was no urgency to raise interest rates.

The EUR/GBP cross trades in negative territory near 0.8655 during the early European trading hours on Monday. The Euro (EUR) remains weak against the British Pound (GBP) following the upbeat German Retail Sales data. The preliminary reading of the Harmonized Index of Consumer Prices (HICP) from the Eurozone will be released on Tuesday. 

Data released by Destatis on Monday showed that German Retail Sales, a key measure of consumer spending, fell 0.3% MoM in April. This figure followed a fall of 0.3% (revised from -2.0%) and came in better than the market expectation of a 0.4% decrease. 

On an annualized basis, Retail Sales dropped 0.3% in April, versus the prior release of a 0.2% decline (revised from -2.0%). The German economic data fails to boost the EUR in an immediate reaction.   

On the UK’s front, BoE governor Andrew Bailey said on Friday that the UK central bank is in no rush to raise interest rates while the outcome of the Iran war remains uncertain and the UK’s growth rate stays weak.  “We have to monitor the situation in the Middle East and how it affects the UK economy and inflation very closely and adjust policy as required,” said Bailey. 

Money market futures now imply 32 basis points (bps) of tightening this year, one quarter-point hike, and roughly a 30% chance of a second, according to Reuters. 

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GBP/USD Consolidates around mid-1.3400s amid firm USD, cautious setup

  • GBP/USD lacks any firm intraday directional bias and oscillates in a narrow range on Monday.
  • Geopolitical uncertainties and hawkish Fed expectations underpin the USD, capping spot prices.
  • The technical setup, too, warrants some caution before positioning for any meaningful upside.

The GBP/USD pair struggles to capitalize on its goodish recovery from a one-and-a-half-week low, touched last Thursday, and oscillates in a narrow range around mid-1.3400s at the start of a new week. The US Dollar (USD) regains some positive traction amid the uncertainty over a potential US-Iran peace deal and hawkish US Federal Reserve (Fed) bets. This, in turn, is seen as a key factor acting as a headwind for spot prices.

The British Pound (GBP), on the other hand, is undermined by expectations for a delayed rate hike from the Bank of England (BoE), especially after softer inflation figures and an unexpected rise in the Unemployment Rate. Traders, however, opt to wait for this week’s important US macro releases and BoE Governor Andrew Bailey’s appearances before positioning for the next leg of a directional move for the GBP/USD pair.

From a technical perspective, spot prices hold a capped tone below the 200-period Simple Moving Average (SMA) on the 4-hour chart, which should continue to act as overhead supply. However, the rising trend-line support around 1.3356 underpins the broader advance. Meanwhile, momentum indicators are mildly constructive, yet signaling at stabilizing downside pressure rather than a decisive bullish shift for the GBP/USD pair.

In fact, the Relative Strength Index (RSI) is hovering above the 50 line, while the Moving Average Convergence Divergence (MACD) is marginally positive. This, in turn, suggests that any subsequent move up is more likely to confront stiff resistance near the 1.3500 psychological mark (200-period SMA). A sustained move above this barrier would be needed to reopen the path toward higher highs.

On the downside, the next notable support aligns with the prior uptrend support line around 1.3356, where buyers would be expected to emerge on a deeper pullback. A convincing break below that zone would suggest a more meaningful deterioration of the medium-term bullish structure.

(The technical analysis of this story was written with the help of an AI tool.)

GBP/USD 4-hour chart

Chart Analysis GBP/USD

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.09%-0.05%0.13%0.07%-0.03%0.31%0.27%
EUR-0.09%-0.12%0.00%-0.02%-0.07%0.23%0.17%
GBP0.05%0.12%0.15%0.11%-0.01%0.33%0.28%
JPY-0.13%0.00%-0.15%-0.03%-0.14%0.21%0.14%
CAD-0.07%0.02%-0.11%0.03%-0.11%0.23%0.18%
AUD0.03%0.07%0.00%0.14%0.11%0.29%0.28%
NZD-0.31%-0.23%-0.33%-0.21%-0.23%-0.29%-0.05%
CHF-0.27%-0.17%-0.28%-0.14%-0.18%-0.28%0.05%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

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Pound Slumps Over 1% in May

The pound was trading around $1.342 at the end of May, set for a monthly loss of over 1% against the USD. The decline came amid a mix of rising political uncertainty, following UK Prime Minister Keir Starmer’s Labour Party defeat in local elections, and ongoing US-Iran negotiations to end the three-month war, which has contributed to global inflation pressures. A tentative deal to extend the ceasefire by 60 days remains pending President Donald Trump’s approval. The UK’s economic challenges, including its lack of tech stocks, heavier reliance on oil, and overall pessimism about growth, have added to the currency’s struggles, as has its vulnerability to energy shocks. On the monetary policy front, investors have slightly scaled back expectations for further Bank of England rate hikes this year, as oil prices eased from four-year highs and recent UK data pointed to a cooling labor market, softer-than-expected inflation, and signs of moderating economic activity.

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GBP recovers against US Dollar; outlook remains weak due to Iran worries

  • The British Pound recovers almost half of its early losses against the US Dollar.
  • Middle East tensions re-escalate due to the exchange of attacks between the US and Iran.
  • 10-year UK gilt yields have remained lower in the past few weeks due to easing hawkish BoE bets.

The British Pound claws back half of its early losses and rebounds to near 1.3400 against the US Dollar (USD) during the European trading session on Thursday from the intraday low of 1.3367. The recovery move in the GBP/USD pair appears to be short-lived as Middle East conflicts have re-escalated.

At press time, S&P 500 futures and Asian stock markets have also recovered significantly. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, retreats from its intraday high of 99.54, but is still 0.18% higher to near 99.40. A slight correction in the WTI Oil price has also been observed from the day’s high of $91.17 to near $90.14.

Geopolitical tensions in the Gulf region have been reignited due to the exchange of attacks between the United States (US) and Iran. Earlier in the day, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that it attacked US military bases in retaliation against Washington’s strikes near Bandar Abbas airport.

This was the second attack by the US this week after the so-called “defensive strikes” on Iranian boats deploying mines and their missile launching sites.

Meanwhile, United Kingdom (UK) gilt yields have also recovered strongly after a weak opening due to Middle East concerns. 10-year UK gilt yields have rebounded to near 4.87% from the day’s low of 4.81%.

UK gilt yields have been declining in the past few weeks due to easing hopes of a near-term Bank of England (BoE) interest rate hike. Traders have pared hawkish BoE bets lately due to weakening job market conditions and lower household spending.

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Euro hesitates above 0.8650 against the British Pound as Middle East tensions rise

  • EUR/GBP struggles to extend gains beyond 0.8660 but remains steady above 0.8650.
  • Risk appetite has faltered on Thursday as the US and Iran exchange attacks.
  • ECB-BoE monetry policy divergence keeps the pair buoyed.

The Euro (EUR) is trading flat against the British Pound (GBP) on Thursday. EUR/GBP bulls are struggling to find acceptance above 0.8660 following a 0.4% rally over the previous two days, although downside attempts remain contained above 0.8655 so far.

Speculative demand for the common currency is faltering on Thursday as market sentiment sours and Oil prices jump with tensions between the US and Iran escalating again.

The US military launched fresh strikes on Iranian military sites in the province of Bandar Abbas that, according to the US Central Command (Centcom), “posed a threat around the Strait of Hormuz.” Iran’s Islamic Revolutionary Guard Corps (IRGC) affirmed that they targeted US bases in the Gulf region, and Kuwait authorities reported interceptions of hostile drone and missile attacks.

ECB-BoE monetary policy divergence

The Euro, however, remains fairly steady, favoured by monetary policy divergence between the European Central Bank (ECB) and the Bank of England (BoE). Futures markets are pricing a 91% chance that the ECB will hike interest rates at its June 11 meeting, according to data by the ECB Watch Tool. The BoE, on the contrary, is not expected to tighten its monetary policy anytime soon.

The ECB Chief Economist, Philip Lane, warned on Thursday that inflationary consequences from the US-Iran war will outlast the conflict and that the bank must prevent the general belief that inflation will remain high for a long time to take hold.

Later on Thursday, ECB President Christine Lagarde is expected to take part in a central bankers’ meeting, and her comments on monetary policy will be listened to with particular interest.

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GBP softens to near 1.3400 as US-Iran tensions boost safe-haven US Dollar

  • GBP/USD loses momentum to around 1.3400 in Thursday’s early Asian session. 
  • US military carried out new strikes in Iran; Trump said he won’t rush into a deal with Tehran. 
  • Traders reduce their bets on BoE rate hikes due to easing concerns about political developments and softer UK data. 

The GBP/USD pair attracts some sellers near 1.3400 during the Asian trading hours on Thursday. The British Pound (GBP) weakens against the US Dollar (USD) on fresh geopolitical developments. Markets remain cautious ahead of the release of the US April Personal Consumption Expenditures (PCE) Price Index inflation report, which is due later in the day. 

The US military carried out new strikes in Iran, targeting a site that posed a threat to US forces and commercial traffic, according to Reuters. The US described the actions as measured, purely defensive, and intended to maintain the ceasefire. 

On Wednesday, President Donald Trump vowed to reach a favorable deal to end the war with Iran, warning that the regime’s efforts to bore him with waiting will not work because “I don’t care about the midterm elections.” Rising tensions and signs of a prolonged conflict in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair in the near term. 

Markets have scaled back expectations for a rate hike from the Bank of England (BoE) following softer inflation data, an unexpected rise in the Unemployment Rate to 5.0% for April, and easing political concerns.  

“Traders now price one rate hike fewer in 2026 than at the end of the previous week, and gilt yields saw the biggest weekly drop since late-2023,” Pantheon Macroeconomics said in a note on Tuesday. “We estimate that lower yields were driven by lower oil prices, a fall in betting-market odds on Sir Keir Starmer being replaced, and Andy Burnham committing to maintain current fiscal rules,” they added.