- Progress in UK–EU talks on trade and cooperation is boosting GBP sentiment, limiting EUR/GBP upside.
- Eurozone data signals slowing growth and deflationary pressure, keeping the euro under pressure.
- Strong UK services growth supports the pound, highlighting a divergence between EUR and GBP momentum.
The EUR/GBP currency pair slipped by 0.14% today. This decline was driven by the strength of the GBP following progress in EU-UK ties. Renewed momentum in UK-EU cooperation talks has come into focus. Discussions are centered on trade, defense, and post-Brexit relations. Recent meetings and comments from UK-EU officials have reinforced this momentum.
Concerns remain over the UK’s fiscal outlook. There is also growing speculation that the Bank of England may ease interest rates. Historically, this has resulted in a softer UK policy stance compared to the Eurozone.
This article explores the key political and macroeconomic developments in the UK and the Eurozone. It also examines how these factors may influence the EUR/GBP, alongside the pair’s technical outlook.
UK-EU Talks Developments and Their Impact on EUR/GBP:
- UK-EU talks reached an open-minded deal for the customs union. Valdis Dombrovskis, the EU Economy Commissioner, said that the bloc is ” ready to engage with an open mind” on closer trade ties with the UK.
- Despite this openness, Downing Street has rejected rejoining the customs union or single market, confirming that these remain key UK red lines.
- Talks are taking place in multiple areas beyond the customs union, including: A deal on veterinary standards to avoid trade frictions for animals and food. Travel and work exchange plans for young people. Carbon taxes, pollution limits, and climate cooperations.
These talks are generally good for the British Pound and could cause a little bit down pressure on the EUR/GBP rate. If the talks go well, the pound will get stronger. If not, the pound could get weaker, and the EUR/GBP would go up.
Upcoming Economic Releases: Impact on EUR/GBP:
- The economic calendar for the Eurozone includes the Retail Sales data. It’s expected to confirm the rising deflation, which forced Martin Kocher last week to signal that the monetary policy would ease interest rates.
- Market participants expect that the Service PMI is likely to confirm that the sector grew at its lowest pace in the last four months in January.
- Meanwhile, they expect that the UK Global S&P Services PMI will confirm that the sector’s activity accelerated to a 21-month high of 54.3 in January, versus 51.5 in the previous month.
Technical Analysis for the EUR/GBP:
The EUR/GBP pair is currently trading near 0.8617. It shows a continued weakness after breaking below the 0.8653 support level. The pair appears to be approaching the August 2025 low at 0.8597, which could act as a critical support area. EUR/GBP’s price action shows a series of lower highs and lower lows, indicating a clear bearish trend.
The MACD confirms bearish momentum and suggests that sellers are still in control of the short-term trend, with little sign of immediate reversal. The RSI is currently around 29.5 whih signals that the pair is entering oversold territory.
Overall, EUR/GBP remains bearish in both trend and momentum, with critical attention needed at the August 2025 low for potential support or reversal. The combination of oversold RSI and MACD below zero suggests that short-term corrections are possible, but the dominant trend is downward.
EUR/GBP is falling due to GBP strength supported by progress in UK–EU trade talks and stronger UK services data, while Eurozone growth and inflation show weakness. Technically, the pair has broken key support at 0.8653, with the MACD confirming bearish momentum and RSI in oversold territory.
A short-term bounce is possible because the RSI is oversold, but the dominant trend remains bearish. Traders should watch the August 2025 low at 0.8597 as critical support.