During Monday's Asian trading session, the EUR/GBP pair recovered from the previous session's low to trade near 0.8740, with overall limited volatility.
This movement follows a US Supreme Court ruling that former President Trump's tariff measures, implemented under emergency powers, lacked congressional authorization. Subsequently, Trump indicated plans to advance a new 15% global tariff plan through alternative trade legal frameworks.
The US Treasury Secretary also suggested utilizing alternative legal pathways to maintain existing tariff arrangements. This policy uncertainty has kept global markets cautious.
In Europe, an EU trade official stated that the EU might pause the advancement of relevant agreements with the US until clearer trade policy guidance is obtained. This has led to relatively restrained short-term performance for the Euro.
UK data provided some support for the Pound. January retail sales increased by 4.5% year-on-year, significantly surpassing market expectations of 2.8%. Concurrently, the preliminary S&P Global PMI for February indicated that both the services and manufacturing sectors remained in expansion territory, signaling an improvement in economic activity.
However, an increase in the Q4 unemployment rate has reinforced market expectations for a 25-basis-point rate cut by the Bank of England at its March meeting. Money markets are currently pricing in a 75-80% probability of such a move.
Considering the previous impact of the UK retail sector, employment costs, and inflationary pressures, the current strength in retail sales appears to reflect a phase of consumer resilience rather than a trend of sustained improvement.
If the labor market continues to slow, consumer momentum could face the risk of deceleration in the coming months, which also limits the medium-term upside potential for the Pound.
From a daily chart perspective, the EUR/GBP pair recently retreated from the 0.8780 area and found support near 0.8700. It is currently oscillating within a 0.8700–0.8780 range. The 5-day and 10-day moving averages are flattening, with price action showing repeated back-and-forth movement around these averages, indicating a lack of clear directional trend.
The MACD indicator is near the zero line with its histogram contracting, suggesting clearly weakened momentum. The RSI fluctuates around the 50 level, indicating a balance between bullish and bearish forces. Key support levels below are seen at the 0.8700 and 0.8660 areas; a decisive break below these could open the door for further downside.
Resistance above is located near the 0.8780 and 0.8820 areas. A sustained break above the 0.8780 level is likely necessary to potentially restart a phase of rebound.
The current fluctuations in EUR/GBP are driven more by external policy uncertainty than by a significant divergence in Eurozone and UK fundamentals. While UK retail and PMI data provided a short-term boost to the Pound, a weakening labor market and rising expectations for rate cuts pose medium-term pressures.
As the contest between UK consumer resilience and a cooling labor market lacks a clear direction, the EUR/GBP pair is likely to maintain its range-bound movement. If subsequent UK retail data continues to show strength, the Pound may gain further support. Conversely, if slowing employment and income growth begin to impact consumer confidence, the exchange rate structure could tilt back towards an upward bias.