EUR/GBP Trades Near 0.8560 as ECB and BoE Policy Expectations Continue to Diverge

The euro remained near its lowest level in around one year against the British pound on Friday, with EUR/GBP trading around 0.8565. According to Trading Economics, the pair is on track for a weekly decline of approximately 0.7%.

Recent weakness in the euro has reflected softer-than-expected inflation data from the euro area together with comments from European Central Bank (ECB) President Christine Lagarde that were generally interpreted as supportive of a less restrictive policy outlook.

Different Policy Signals from the ECB and the Bank of England

Data released on Wednesday showed that Eurozone Harmonised Index of Consumer Prices (HICP) inflation slowed more than expected in June, reducing expectations for additional monetary policy tightening in the near term.

Speaking at the ECB Forum in Sintra, ECB President Christine Lagarde said risks to euro area inflation and economic growth had become more balanced while noting that second-round inflation effects had moderated. Market participants generally interpreted these remarks as being consistent with expectations that the ECB could maintain its current policy stance at its upcoming meeting.

By contrast, the Bank of England (BoE) has maintained its policy rate at 3.75% for four consecutive meetings. At its June meeting, two of the nine members of the Monetary Policy Committee voted in favor of raising interest rates.

As a result, the policy rate differential of around 150 basis points continues to provide relative support for sterling, despite the UK's moderate economic growth.

Technical Picture: Downward Bias Remains While Selling Momentum Appears to Ease

EUR/GBP has declined for four consecutive sessions, trading near 0.8567.

On the four-hour chart, the Relative Strength Index (RSI) remains just above oversold territory, while the MACD continues to register slightly below its neutral level.

These indicators are generally interpreted as suggesting that downside pressure remains, although the pace of selling may be moderating.

Friday's price action has also formed an inside-day pattern, with the pair remaining below Thursday's high of 0.8574.

Key Levels to Watch

Resistance

1. 0.8600 – 38.2% Fibonacci retracement of the recent two-week decline, corresponding with the June 24 and June 30 lows

Support

1. 0.8546 – Thursday's low

If the pair remains below this support area, market attention may shift toward the 0.8510 region, corresponding to the late-June 2025 low. Below that level, the next notable support area is located near 0.8400.

Why It Matters for Southeast Asian Traders

The final Eurozone and UK PMI readings scheduled for release on Friday are expected to provide additional insight into manufacturing and services activity across both economies.

With market expectations for the ECB and the Bank of England continuing to differ, the policy rate differential may remain an important factor influencing EUR/GBP, alongside upcoming economic data and changes in broader market sentiment.

Technical analysis and pricing data were sourced from FXStreet and Trading Economics. This content is provided for informational purposes only and does not constitute investment advice.