Track market-moving stories before they get noisy

EUR/GBP trades in a narrow range on Wednesday as buyers struggle to extend Tuesday’s rebound. The 100-period Simple Moving Average (SMA) at 0.8599 limits the immediate upside, although momentum indicators retain a modest bullish bias. At the time of writing, the cross trades around 0.8588, little changed on the day.

The fundamental outlook leans to the upside. Markets have fully priced in a 25-basis-point interest rate hike from the European Central Bank (ECB) on Thursday, which would be its second increase this year, after higher Oil prices intensified inflation pressures across the Eurozone. These expectations lend support to the Euro (EUR).

Meanwhile, the Bank of England (BoE) is widely expected to leave borrowing costs unchanged when it meets on September 17, offering little support to the British Pound (GBP). Concerns over the UK’s fiscal position also weigh on sentiment toward the currency.

Analysts at Rabobank acknowledge that “higher oil prices will feed through into more inflation potential,” but note that, “to date, it would appear that Governor Bailey has been confident that the cyclical loosening in the UK labour market means that second-order inflation effects will be avoided and that disinflation will persist.”

Rabobank also highlights that the July 30 policy meeting was “more hawkish than expected,” with “3 members of the MPC voting for an immediate rate rise.” Even so, they argue that “there is a high bar for the doves on the committee to vote for a tightening in policy,” suggesting that a broader shift toward hikes remains unlikely for now.

Technical analysis

On the daily chart, EUR/GBP holds a mild bullish bias above the rising 50-day Simple Moving Average (SMA) at 0.8553 and the ascending trend-line support near 0.8570. However, the 100-day SMA at 0.8600 and the 200-day SMA at 0.8649 limit the upside. The Relative Strength Index (RSI) stands around 58, indicating positive momentum without overbought conditions, while the Moving Average Convergence Divergence (MACD) histogram remains slightly positive.

A break above the 100-day SMA could bring the 200-day SMA into focus. On the downside, the trend line near 0.8570 offers initial support, followed by the 50-day SMA at 0.8553. A clear move below these levels would expose the 0.8500 and 0.8450 horizontal support levels.

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

Euro Price Today The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD-0.20%-0.17%-0.51%-0.10%-0.08%0.04%-0.25%EUR0.20%0.05%-0.30%0.09%0.12%0.25%-0.04%GBP0.17%-0.05%-0.33%0.06%0.09%0.22%-0.07%JPY0.51%0.30%0.33%0.40%0.43%0.52%0.27%CAD0.10%-0.09%-0.06%-0.40%0.02%0.15%-0.14%AUD0.08%-0.12%-0.09%-0.43%-0.02%0.13%-0.14%NZD-0.04%-0.25%-0.22%-0.52%-0.15%-0.13%-0.27%CHF0.25%0.04%0.07%-0.27%0.14%0.14%0.27% 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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

TL;DR: Thursday’s ECB hike to 2.50% is almost fully priced, but economists overwhelmingly expect it to be the last move while markets price roughly two more hikes within a year — and EUR/GBP is testing a major resistance cluster at 0.8610–0.8617 at exactly the moment that disagreement needs resolving.

The Hike Is Almost Certain. What Comes After It Is Not. Calling Thursday’s ECB meeting a non-event because a 25bp hike is already almost fully priced misses the part of the meeting that actually matters.

There’s little disagreement over the immediate decision. Markets assign roughly a 95% probability to a rate increase from 2.25% to 2.50%, while all 65 economists in the latest Reuters poll expect the same move. But beyond September, the consensus breaks apart sharply.

Economists overwhelmingly think Thursday will mark the end of the tightening campaign. Rates markets do not. Some 91% of economists expect the deposit rate to finish 2026 at 2.50%, while 78% see it still there through the middle of 2027. OIS pricing, by contrast, implies around 72bp of cumulative tightening over the coming 12 months — roughly three hikes in total, including the one expected this week.

That leaves close to two additional moves embedded in the curve beyond Thursday. So the real question isn’t whether the ECB hikes. The hike is priced. The rate path is not. And EUR/GBP has arrived at a particularly awkward place for that disagreement to be resolved.

EUR/GBP Is Testing More Than Just Another Resistance Level The pair has recovered from 0.8453 into a resistance zone where several independent technical methods converge.

On the daily chart, the broader cycle runs from the October 2024 base around 0.8221 through the rally to 0.8863, followed by a decline that developed through lower highs before stalling at 0.8453. That low wasn’t technically random. The 61.8% retracement of the entire 0.8221–0.8863 advance sits around 0.8466, almost exactly where the decline eventually found support. That strengthens the significance of 0.8453 as a potential medium-term turning point.

But proving a bottom exists is very different from proving a new uptrend has begun. EUR/GBP has now reached the 0.8610 area, and this is where the recovery faces its first serious test. Three separate forms of daily resistance converge there.

First is horizontal structure. EUR/GBP previously consolidated around 0.8610 on two occasions during the decline, giving the zone clear historical significance. Second is the 38.2% retracement of the 0.8863–0.8453 decline, which also comes in almost exactly at 0.8610.

The weekly chart raises the bar further. The 55-week EMA currently sits around 0.8617, leaving EUR/GBP facing a broader resistance cluster between roughly 0.8610 and 0.8617. That matters because the pair isn’t simply approaching a level where one technical method happens to suggest resistance — several different structures are saying much the same thing. It will probably take real fundamental conviction to clear them.

Momentum Has Already Started to Hesitate The higher-timeframe momentum picture is still constructive. Daily RSI is around 61, leaving considerable room before overbought territory, while daily MACD has crossed higher and is holding above zero. There’s no obvious daily exhaustion signal.

The four-hour chart, however, is beginning to tell a different story. EUR/GBP reached 0.8607 last week, effectively tagging the lower edge of the resistance cluster, but momentum failed to confirm the move. Four-hour MACD shows bearish divergence, as the latest price high wasn’t accompanied by a matching momentum peak. Four-hour RSI is only around the upper-50s.

The rally hasn’t stalled because EUR/GBP is already deeply overbought. It has stalled because momentum is fading exactly where substantial resistance should be expected. That makes the current setup genuinely two-sided. A rejection would fit the existing structure. But there’s still enough higher-timeframe momentum for a sufficiently strong catalyst to force a breakout. Thursday’s ECB projections could provide that catalyst.

Economists and Markets Are Making Different Bets The ECB announces its decision on Thursday, September 10, at 1215 GMT, followed by President Christine Lagarde’s press conference at 1245 GMT.

The expected hike itself is close to settled. The latest Reuters poll, conducted between August 31 and September 3, found all 65 economists expecting a 25bp increase to 2.50%. That conviction has risen steadily: 83% expected a September hike in the previous poll, compared with 72% before the July meeting, when the ECB ultimately held rates unchanged.

But the firm consensus around September masks a much bigger disagreement about what comes next. Economists largely see this as the second and final move of what would be the ECB’s shortest tightening campaign in 15 years. Markets are leaving the door much wider open.

OIS pricing late Sunday put Thursday’s hike probability at 94.8%, equivalent to around 23.7bp of tightening. Yet the curve discounts approximately 72.1bp over the next 12 months. October itself carries only around a 40% probability of another move, while December is somewhat higher at roughly 44%, consistent with the possibility that the ECB could skip October and wait for the next major projection round.

But the exact meeting doesn’t matter as much as the cumulative message. Investors are effectively saying September probably won’t be enough. Economists are saying it probably will. Thursday’s projections need to begin telling markets which side has the stronger case.

The June Forecasts Already Included the Iran Shock This is why simply seeing higher inflation forecasts on Thursday wouldn’t automatically be hawkish. The ECB’s June projections were already constructed after the Iran war had become a major economic shock.

On June 11, the ECB raised the deposit rate from 2.00% to 2.25%, the main refinancing rate from 2.15% to 2.40%, and the marginal lending rate from 2.40% to 2.65%. The central bank explicitly tied the decision to the conflict and its effects on commodity markets.

Its June staff projections put headline inflation at 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028. Core inflation excluding energy and food was projected at 2.5%, 2.5%, and 2.2%. GDP growth was seen at 0.8%, 1.2%, and 1.5% over the same three years.

Compared with March, the direction was already stagflationary: inflation forecasts moved higher while growth was revised lower, with the ECB linking both changes to the war’s effects on energy prices, real incomes, and confidence. So Thursday isn’t about whether the ECB has suddenly discovered an energy shock. It’s about whether that shock is proving more persistent or more broad-based than the ECB assumed in June.

Headline Inflation Says One Thing. Core Inflation Says Another. The latest inflation data make that question unusually clean. Eurozone headline inflation accelerated from 2.9% in July to 3.3% in August, putting it above the ECB’s 3.0% full-year projection for 2026. But the increase was driven overwhelmingly by energy.

Underlying measures moved the other way. Core CPI eased from 2.5% to 2.4%, while services inflation slowed from 3.3% to 3.0%. That divergence is the heart of Thursday’s policy debate.

If headline inflation is rising because the conflict has pushed up energy prices, while core and services inflation continue to cool, the ECB is dealing primarily with a supply shock. Higher rates can’t produce more oil or reopen shipping routes. They matter only if those higher energy costs begin feeding into wages, services prices, and inflation expectations. So far, the latest data don’t clearly show that second-round process taking hold.

That’s why the economist consensus can simultaneously accept a September hike and reject the need for several more afterward. The ECB can respond to the immediate inflation risk without concluding that a prolonged tightening campaign is necessary.

The complication is that supply shocks don’t always stay clean. Persistent increases in visible fuel, diesel, and food costs can influence inflation expectations. If households and workers start building those costs into wage demands, and companies begin passing them into broader prices, the distinction between an energy shock and underlying inflation becomes much less comfortable. Thursday’s projections should show whether the ECB thinks Europe is moving closer to that point.

Three Forecast Tests Matter More Than the 25bp Hike 1. Headline Inflation: How Big Is the Revision? A higher 2026 headline inflation forecast would hardly be surprising after August inflation reached 3.3%. The more important question is what kind of revision the ECB makes.

A modest increase confined mainly to 2026 could amount to little more than technical acknowledgement of higher energy prices already visible in the data. That wouldn’t, by itself, justify another two hikes after September. A larger revision extending meaningfully into 2027 would carry more significance, implying the ECB sees the inflation shock lasting longer than anticipated in June.

2. Core Inflation: The Real Hawkish Test The core projections are much more important. In June, the ECB forecast core inflation at 2.5% in 2026, 2.5% in 2027, and 2.2% in 2028.

If that path is unchanged or revised slightly lower, the central bank would effectively be confirming that underlying inflation hasn’t materially deteriorated despite the increase in energy-driven headline CPI. That would strongly reinforce the “September and done” argument.

A meaningful upward revision would carry a completely different message. It would suggest policymakers see evidence — or at least a growing risk — that the supply shock is beginning to bleed into more persistent inflation dynamics. That’s the kind of surprise that could justify the extra tightening currently embedded in the market curve.

3. Growth: How Much Damage Is the Shock Doing? The June growth projections provide the other side of the equation. The ECB expected GDP growth of 0.8% in 2026, 1.2% in 2027, and 1.5% in 2028.

Private-sector consensus remains broadly aligned with the first two numbers, suggesting no obvious reason for a large revision based purely on the growth data available so far. But the intensifying conflict creates clear downside channels through energy costs, weaker household purchasing power, and confidence.

If the ECB cuts growth further while raising inflation, Thursday becomes more complicated rather than simply more hawkish. Higher inflation alongside weaker growth strengthens the policy trade-off. That’s why markets need to look beyond the headline forecast revision and ask what exactly is driving it.

Scenario One: The ECB Confirms This Is Still Mainly a Supply Shock The cleanest EUR-negative outcome would be straightforward. Headline inflation is revised modestly higher, but core inflation stays broadly unchanged or eases. Growth stays close to the June path or receives a moderate downgrade.

That would tell markets the ECB still sees much of the inflation deterioration as energy-driven rather than evidence of a broader inflation resurgence. It would also validate the dominant economist view that Thursday’s hike can be the last.

This is where the asymmetric market risk becomes important. September itself doesn’t need to be repriced lower — the 25bp increase can happen exactly as expected. The adjustment would come from the additional tightening priced beyond September. With around 72bp embedded over the next year, the curve has significant room to remove future hikes without challenging Thursday’s move at all.

That would be a genuinely EUR-negative outcome. For EUR/GBP, rejection from the 0.8610–0.8617 resistance cluster would then have both technical and fundamental backing. The more important bearish confirmation would come below 0.8545. A break there would strengthen the view that the rebound from 0.8453 was corrective rather than the start of a durable trend reversal, exposing 0.8453 again. A renewed break of that low would reopen the broader decline from 0.8863.

Scenario Two: The ECB Validates the Market’s Hawkish View The bullish EUR scenario requires more than an energy-driven headline revision. Core inflation would need to move higher as well, or the projections and Lagarde’s communication would need to show the ECB is becoming more concerned about second-round inflation pressure.

The press conference could be just as important as the forecasts here. The ECB has repeatedly emphasized that it isn’t pre-committing to a particular rate path and will decide meeting by meeting. If that language stays essentially intact while Lagarde makes little effort to push back against the roughly two additional hikes markets are pricing beyond September, investors could interpret the meeting as tacit confirmation that the tightening cycle still has room to run.

That would give EUR/GBP the kind of Euro-specific catalyst needed to challenge the current technical ceiling. A decisive break through 0.8610–0.8617 would be the first important signal that the decline from 0.8863 completed at 0.8453. The next immediate objective would be the upper boundary of the descending daily channel around 0.8644. A sustained break there would make the recovery from 0.8453 look increasingly like a genuine reversal rather than another rebound within the broader decline.

Scenario Three: The ECB Solves Nothing The third outcome may be the easiest to imagine and the hardest to trade. Headline inflation is revised higher. Growth is cut. Core inflation moves too little to settle whether the shock is genuinely spreading.

That would leave the ECB facing essentially the same two-sided problem it described in June: upside inflation risk and downside growth risk at the same time. In that environment, markets may struggle to decide whether the extra tightening already priced into the curve is justified.

EUR/GBP could reject again from 0.8610 without generating enough downside conviction to break 0.8545. And if that happens, the technical stalemate simply survives another day. Friday’s UK data could then become the tie-breaker.

Friday’s UK GDP Matters Most If the ECB Leaves a Draw The ONS releases July monthly GDP on Friday, September 11, alongside the trade balance, industrial and manufacturing production, construction output, and the NIESR monthly GDP tracker.

The broader UK growth picture is modest rather than collapsing. GDP growth slowed from 0.6% q/q in Q1 to 0.4% in Q2, while the IMF forecasts 1.0% growth for 2026 and the OECD 0.9%.

That gives Friday’s releases clear Sterling relevance. But they shouldn’t displace Thursday’s ECB meeting as the central driver of this setup. If the ECB convincingly validates further tightening, EUR/GBP may already be testing or breaking resistance before the UK numbers arrive. If the ECB instead reinforces the “one and done” view, the Euro could already be retreating from resistance, leaving UK data as a secondary confirmation or counterweight. Friday becomes most important under the mixed scenario, where Thursday fails to provide enough conviction to resolve either side of the technical range.

ActionForex’s Technical View on EUR/GBP: The Market Has Already Drawn Its Own Line EUR/GBP is approaching Thursday with an unusually clean combination of fundamental and technical uncertainty. The rate decision itself is almost known. The projections are not.

Economists overwhelmingly think 2.50% will mark the end of the ECB’s tightening campaign. Rates markets are effectively pricing another two moves beyond September. That disagreement is now meeting a technical structure that also demands resolution.

At 0.8610–0.8617, EUR/GBP faces horizontal resistance, a major Fibonacci retracement, the descending daily trendline, and the 55-week EMA. Four-hour momentum has already begun to fade around the zone, but the daily recovery hasn’t yet exhausted itself. The pair therefore needs conviction, not merely another expected rate hike.

If Thursday shows headline inflation is hotter but underlying inflation remains contained, the additional tightening embedded in the curve has room to unwind. Rejection from resistance would then gain a clear fundamental explanation, with 0.8545 becoming the critical downside trigger.

If the ECB lifts the core inflation path and leaves markets comfortable pricing further tightening, the Euro could finally gain enough support to break the resistance cluster. That would shift attention toward 0.8644 and strengthen the case that 0.8453 marked a more durable bottom.

And if the projections split the difference, Friday’s UK GDP may have to finish the job. Either way, dismissing Thursday because the hike is already priced misses the real trade.

The hike is priced. The rate path is not. And EUR/GBP is sitting exactly where that difference starts to matter.

Key Takeaways Thursday’s ECB hike to 2.50% is nearly certain, but economists (91% see 2.50% through year-end) and markets (72bp priced over 12 months) disagree sharply on what comes after it. Core inflation (2.4% in August) and services inflation (3.0%) are both cooling even as headline inflation rises to 3.3% on energy, making the core forecast path the real hawkish test. EUR/GBP faces a genuine resistance cluster at 0.8610-0.8617, where horizontal structure, a 38.2% retracement, and the 55-week EMA all converge. An unchanged or lower core inflation path would validate the “September and done” view and favor rejection toward 0.8545 and then 0.8453. A higher core inflation path, or a press conference that doesn’t push back on further tightening, would open a break toward 0.8644, with Friday’s UK GDP as the tie-breaker if Thursday leaves the question unresolved.

TL;DR: A hawkish BoE tailwind has lifted Sterling this week, but Thursday’s June monthly GDP — not the flattering Q2 headline — will determine whether that hawkish drift can survive into September, with EUR/GBP downside and GBP/CHF upside both hanging on the answer.

Sterling Has a Hawkish BoE Tailwind — But Thursday Will Test It Sterling has been mildly firmer against the Euro and Swiss Franc this week, helped in part by an increasingly hawkish tone inside the BoE. At the July 30 meeting, the MPC voted 6–3 to hold Bank Rate at 3.75%, with Megan Greene, Catherine Mann, and Huw Pill backing a hike to 4.00%. Governor Andrew Bailey remained cautious and played down expectations of an imminent move, but the direction of the voting pattern is hard to ignore.

Hawkish dissent has widened at every meeting this year:

April: 8–1. June: 7–2. July: 6–3. That’s a more meaningful signal than a static minority repeatedly casting the same votes. It suggests the Committee is gradually moving closer to another hike, even if the majority isn’t there yet. Put differently, the BoE is still holding, but hawkish pressure is building underneath that hold.

Oil Is Making the Policy Question More Urgent The recent rise in oil adds urgency to that debate. The ECB has already tightened in response to energy-driven inflation pressure, while the BoE has so far stayed put. If crude remains elevated, higher energy costs will keep feeding into the UK inflation outlook and increase pressure on the MPC to prevent second-round effects from taking hold.

Still, the BoE cannot respond to oil in isolation. The key question is whether the domestic economy is strong enough to tolerate another increase. That’s why Thursday’s GDP data matter. Strong activity would give existing hawks more room to argue inflation risk deserves priority; a sharper slowdown would strengthen Bailey’s and others’ case for patience.

For Sterling, this relative policy backdrop matters most against currencies where central-bank divergence is clearer. EUR/GBP reflects whether the BoE can begin closing the gap with the ECB, while GBP/CHF has an even cleaner setup given expectations that SNB rates stay pinned near bottom for the foreseeable future.

Why Q2 GDP May Flatter the Underlying Picture Headline Q2 GDP is expected to show 0.4% q/q growth, down from 0.6% in Q1 but still respectable given disruption from the Iran war. Yet that number may overstate underlying resilience.

Earlier in the quarter, manufacturers and clients front-loaded purchases to protect against expected price increases and supply disruption. S&P Global’s May PMI commentary explicitly linked stronger output to that stockpiling behavior, while June data showed those effects fading. That means part of Q2 growth may simply have been activity pulled forward — so a 0.4% quarterly print can look healthy while masking a much weaker economy at quarter-end.

Why June Is the Number That Really Matters That’s why June monthly GDP may carry more information than the Q2 headline itself. June output is expected to fall -0.1% m/m, reversing May’s 0.1% increase. By that point, much of the earlier front-loading had faded, making the monthly figure a cleaner read on how the economy was actually entering Q3.

If Q2 comes in around 0.4% but June contracts more sharply than expected, markets may conclude that resilience was temporary and dependent on stockpiling — giving BoE doves a stronger argument to resist tightening. If June instead holds up better than expected, the message would be much more supportive for Sterling, suggesting the economy retained momentum even after temporary war-related support faded, giving the hawkish bloc more room to expand in September.

So Thursday’s real test isn’t simply whether the UK grew in Q2 — it’s whether the UK economy still had momentum once stockpiling stopped.

ActionForex’s Technical View: EUR/GBP and GBP/CHF EUR/GBP has twice been rejected by the falling 55-day EMA, keeping the downtrend from 0.8863 intact. A break of 0.8528 minor support would suggest the rebound from 0.8453 has already run its course and bring a deeper fall back to retest 0.8453. A sustained break there would reopen the broader decline from 0.8863.

That technical setup would fit a stronger June GDP print particularly well. If the economy proves resilient enough to keep BoE hawks gaining ground, Sterling would have a clearer relative policy advantage against the Euro. On the other hand, a weak June print would weaken that argument and reduce pressure for another EUR/GBP leg lower.

GBP/CHF may offer an even cleaner expression of Sterling strength because the SNB policy outlook is far less hawkish. The rally from 1.0281 is still in progress, although momentum has stalled near the rising channel ceiling. Further upside remains favored while 1.0808 support holds.

A decisive break through channel resistance would open scope for acceleration toward the 161.8% projection of 1.0281 to 1.0674 from 1.0468, at 1.1104. Loss of 1.0808 would instead argue the rally is entering a deeper correction.

Thursday Is Really About September Q2 headline will get attention, but June could decide how markets frame the September BoE meeting. Three consecutive meetings of widening hawkish dissent show the Committee is drifting closer to tightening. Higher oil gives hawks more inflation ammunition — what they still need is evidence the economy can absorb another move.

A resilient June print would strengthen the case for EUR/GBP downside and GBP/CHF upside. A weak one would suggest Q2 strength was partly borrowed from earlier stockpiling, giving BoE doves stronger ground to push back.

Key Takeaways BoE hawkish dissent has widened at every meeting this year, from 8-1 in April to 6-3 in July, signaling gradual movement toward tightening even without a majority yet. Higher oil is adding inflation pressure the BoE can’t ignore, but the Committee needs evidence the economy can absorb a hike before acting on it. June monthly GDP (forecast -0.1% m/m) matters more than the flattering 0.4% Q2 headline, since Q2 strength was partly inflated by stockpiling that faded by June. A resilient June print would support EUR/GBP downside toward 0.8453 and GBP/CHF upside toward 1.1104; a weak print would favor BoE doves and undercut both trades. Thursday’s data matters most for how it shapes September BoE expectations, not for the Q2 headline number itself.

ActionForex

ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.

Rabobank expects renewed pressure on Pound exchange rates as concerns over Prime Minister Andy Burnham’s spending plans unsettle the gilt market. The British Pound concluded this trading week facing a difficult combination of political uncertainty, elevated UK bond yields and doubts over how the new government intends to fund its policy agenda.

UK economists at Rabobank say the initial market response to Burnham’s cabinet and early policy announcements has been notably cautious.

Latest — Exchange Rates:

Pound to Euro (GBP/EUR): 1.171822 (+0.14%)

Pound to Dollar (GBP/USD): 1.332498 (+0.09%)

Euro to Dollar (EUR/USD): 1.137117 (-0.05%)

The UK 10-year gilt yield has moved above 5.0%, while Pound Sterling has ranked as the weakest G10 currency over the latest one-day period.

Although the appointment of an experienced Chancellor has offered some reassurance, the bank warns that uncertainty surrounding the government’s fiscal strategy could keep both gilts and the Pound under pressure.

Rabobank analysts expect EUR/GBP to rise to 0.8650 over the next three months and sees scope for GBP/USD to fall back towards 1.3200.

At current rates, those forecasts imply a weaker Pound against both the Euro and the US Dollar.

Rabobank Warns Burnham’s Honeymoon Could Be Brief Rabobank says the appointment of Healey as Chancellor is a stabilising factor because the country’s finances have been placed in the hands of an experienced politician with previous Treasury exposure and respect across Parliament.

However, the larger question is how Burnham plans to finance his agenda.

The Prime Minister has said he intends to use “flexibility” within the fiscal rules, which Rabobank says could point towards placing some infrastructure-related debt on the balance sheets of public financial institutions.

Although such borrowing might sit outside the most closely watched fiscal measures, it would still need to be absorbed by the bond market.

“The market will be wary about whether this constitutes ‘back door’ funding,” Rabobank says.

The government’s first cost-of-living measure is a reduction in VAT on household electricity bills from October.

Officials have indicated that the measure will be funded by cancelling the previous government’s digital identity programme, although reports have raised doubts over whether that scheme was fully funded in the first place.

Rabobank notes that use of greater flexibility within the fiscal rules could potentially mobilise an additional £16 billion for infrastructure projects over the remainder of the decade.

Infrastructure investment could improve productivity in parts of the UK outside London and the South East, but those benefits may take years to materialise.

Burnam, by contrast, faces a general election in less than three years.

That leaves the government under pressure to deliver visible improvements quickly, increasing the risk that spending commitments expand before the economic benefits become apparent.

“The market is now bracing itself for a list of further announcements,” Rabobank says.

“This suggests that funding issues will remain at the fore of the market’s mind and hints that Burnham’s honeymoon may be short-lived.”

Gilt Market Particularly Sensitive The latest UK borrowing figures were slightly better than expected for June, but borrowing over the first three months of the fiscal year remains above projections from the Office for Budget Responsibility.

At an early stage of the financial year, that overshoot might ordinarily attract limited attention.

Rabobank argues that the political backdrop makes investors more sensitive than usual.

Burnham is associated with the softer left of the Labour Party and has said he wants government to become less reliant on what he described as the “imperial” Treasury.

Against this backdrop, the bond market is likely to demand clear reassurance that new spending plans will remain compatible with the fiscal rules.

Rabobank also highlights structural vulnerabilities in the UK economy.

The country has a low household savings ratio and a substantial current-account deficit, increasing its dependence on overseas capital.

These characteristics can amplify market reactions when confidence deteriorates.

“The UK may not have the largest debt-to-GDP ratio in the developed world, but arguably it has one of the most sensitive debt markets,” Rabobank says.

Lower BoE Expectations Are Another Pound Risk The reduction in VAT on household electricity bills should mechanically lower inflation.

Rabobank also expects headline UK CPI inflation to ease to 2.7% year on year, offering some short-term reassurance to the gilt market.

The inflation outlook remains complicated by higher spot energy prices following the escalation in the US-Iran conflict, but Rabobank believes current Bank of England pricing is too aggressive.

Markets are pricing approximately 43 basis points of BoE tightening over the next six months.

Rabobank expects the central bank to avoid raising rates this year.

“On our view, this is overdone and a reduction in market expectations for BoE policy tightening is another headwind for the pound,” the bank says.

This is important because elevated UK interest-rate expectations have provided Sterling with some protection against fiscal and political concerns.

Were investors to remove those expected rate increases, the Pound would lose part of its yield advantage at the same time as the gilt market remains uneasy about government borrowing.

Image: Exchange Rates UK Research polling shows GBP/USD median bank forecast chart showing the live rate near 1.3325, a Q3 median near 1.32 and the longer-term forecast path GBP/USD Forecast: 1.3200 Comes Back Into View GBP/USD ended the latest session around 1.3325, recording a modest daily gain after Thursday’s 0.47% decline.

The pair has nevertheless fallen by more than two cents from the 15 July close near 1.3540 and remains well below July’s high of 1.3558.

The short-term chart shows Sterling attempting to stabilise around 1.3320 after repeated failures to sustain advances above 1.3340.

GBP/USD is trading close to the 20-period moving average at 1.3327 and session VWAP near 1.3323.

That positioning suggests the pair is currently balanced around its immediate fair-value area rather than developing a strong recovery.

The 200-period moving average near 1.3340 remains the more important overhead barrier.

A recent rebound failed close to that level, confirming the 1.3340-1.3350 region as the first substantial resistance zone.

RSI has recovered to approximately 48 from below 40, showing that downside momentum has eased.

However, the indicator remains below 50 and does not yet signal that buyers have regained control.

Initial support is located around 1.3310, followed by 1.3290.

Rabobank’s 1.3200 objective would come into clearer view following a break below these levels, while July’s low at 1.3221 represents a significant intermediate support area.

On the upside, a sustained move above 1.3340 would reduce immediate downside pressure, although GBP/USD would still need to recover through 1.3400 to suggest the broader July correction has ended.

Image: GBP/USD 15-minute chart with 1.3310 support, 1.3340 resistance and Rabobank’s 1.3200 forecast marked The median bank forecast path also points to near-term weakness before a later recovery.

The Q3 2026 median projection is close to 1.3200, broadly matching Rabobank’s three-month forecast, while the consensus path then rises towards 1.35 in early 2027 and approximately 1.38 by the end of that year.

Rabobank’s view is therefore consistent with the wider consensus in anticipating near-term pressure, although it does not rule out a longer-term recovery.

Image: EUR/GBP survey poll forecasts July 2026 EUR/GBP Forecast: Rabobank Targets 0.8650 EUR/GBP closed around 0.8534 after falling 0.14% in the latest session.

The cross has recovered from July’s low near 0.8455, but remains almost 1% lower for the month and below the July opening level near 0.8614.

The 15-minute chart shows that EUR/GBP has surrendered part of its recent rebound after failing above 0.8550.

The cross is trading close to its 20-period moving average near 0.8533, but remains below session VWAP around 0.8541 and beneath the 200-period moving average near 0.8539.

This leaves the immediate technical picture mixed.

The latest recovery from below 0.8530 shows that selling pressure has moderated, while RSI near 46 has moved above its signal line.

However, the cross remains below the neutral 50 level and has yet to overcome the main intraday resistance cluster.

Initial resistance is located around 0.8539-0.8542, followed by 0.8547 and the recent highs around 0.8550-0.8555.

A break through that area would strengthen the case for a return towards 0.8600.

Rabobank’s 0.8650 forecast lies above the current technical range and would require a more decisive deterioration in Sterling sentiment.

On the downside, support is located around 0.8530, followed by 0.8525.

A break below these levels would weaken the immediate recovery and raise the risk of a renewed move towards 0.8500.

Image: EUR/GBP 15-minute chart with 0.8530 support, 0.8550 resistance The wider bank consensus also leans towards a higher EUR/GBP rate over the coming quarters.

The median forecast stands close to 0.8700 from the third quarter of 2026 through early 2028, before easing towards 0.8600 and then 0.8450 by the end of 2028.

Rabobank’s 0.8650 target is therefore slightly below the near-term consensus median but still implies a meaningful Sterling decline from current levels.

Pound Sterling: Rabobank’s forecasts leave GBP exposed on two fronts Against the Euro, the bank expects EUR/GBP to rise towards 0.8650 as investors question the government’s fiscal plans and reassess the likelihood of Bank of England tightening.

Against the Dollar, it sees GBP/USD falling towards 1.3200 as political uncertainty, gilt-market sensitivity and lower UK rate expectations weigh on the Pound.

The technical charts show that neither move has yet been fully confirmed.

GBP/USD is attempting to stabilise around 1.3320, while EUR/GBP remains below resistance around 0.8550.

However, the fundamental risks identified by Rabobank remain unresolved.

A reduction in expected BoE tightening would remove an important source of Sterling support, while further spending announcements without a convincing funding plan could renew pressure on gilts.

The base case is therefore for Pound Sterling to remain vulnerable, with a GBP/USD break below 1.3290 strengthening the path towards 1.3200 and an EUR/GBP move above 0.8550 opening the way towards Rabobank’s 0.8650 target.