Sterling holds firm as markets watch for the next catalyst.
GBP: Pound holds recent gains
FX markets remain relatively contained, but sterling continues to hold the stronger tone established after last week’s softer US labour market data.
GBP/EUR is trading around 1.17, leaving euro buyers close to the best levels seen in more than a year. The break above the long-standing 1.1600–1.1630 resistance zone has shifted near-term momentum in sterling’s favour, although the move now needs to consolidate above those levels to avoid looking overstretched.
GBP/USD has also recovered well from the June sell-off, briefly testing the 1.34 area as weaker US jobs data reduced expectations for further Federal Reserve tightening this year. The dollar has steadied today, but the broader shift in rate expectations has made its upside look less convincing than it did in late June.
EUR/USD remains near 1.1430, with the euro struggling to build sustained momentum despite last month’s ECB rate hike. Eurozone growth concerns, softer inflation signals and a more cautious policy debate are keeping the single currency under pressure against sterling.
USD: Dollar steadies, but jobs miss limits conviction
The dollar has recovered modestly after two sessions of weakness, helped by a firmer tone in risk markets and renewed attention on geopolitical headlines around the Strait of Hormuz.
However, the broader dollar story remains less clear-cut after last week’s US payrolls miss. The June employment report showed job growth slowing more than expected, which pushed markets to trim expectations for further Federal Reserve tightening.
Attention now turns to Wednesday’s FOMC minutes. These will be watched closely for any sign that policymakers are becoming less comfortable with the hawkish message delivered in June. If the minutes reinforce concern around inflation, the dollar may find support. If they place more weight on the cooling labour market, recent USD weakness could extend.
For GBP/USD, the key near-term area remains around 1.34. A sustained break above that level would give sterling a more constructive technical backdrop, while failure to hold recent gains would leave the recovery looking corrective rather than decisive.
GBP: Sterling supported by yield advantage and improved sentiment
Sterling remains one of the better-performing major currencies, particularly against the euro.
GBP/EUR has pushed to around 1.1700, its strongest area since June 2025. The move has been helped by a combination of UK yield support, reduced domestic political risk and fading expectations that the Bank of England will be forced into a near-term rate-cut cycle.
The pound has also benefited from the recent fall in oil prices, as lower energy costs reduce some of the pressure on the UK’s inflation and growth outlook. That said, today’s renewed Middle East headlines are a reminder that energy markets remain an important risk channel for sterling.
The Bank of England’s Financial Stability Report is not a direct monetary policy event, but it keeps the focus on financial resilience, gilt market stability and broader risk appetite. For now, sterling’s underlying tone remains constructive, but much of the easy upside may already have been captured unless incoming UK data or Bank of England commentary provides a fresh catalyst.
EUR: Euro struggles as growth concerns linger
The euro remains under pressure against sterling and has failed to make meaningful progress against the dollar.
EUR/USD is trading close to 1.1430, with the pair still struggling to escape the gravitational pull of dollar strength. The euro has not received a lasting boost from the ECB’s June rate hike, partly because investors remain concerned about the eurozone growth outlook.
ECB policymaker Fabio Panetta said the eurozone outlook remains fragile, with upside risks to inflation still sitting alongside downside risks to growth. That captures the ECB’s dilemma neatly: inflation risks have not disappeared, but the case for aggressive follow-up tightening is complicated by weak demand and softer recent data.
Against the pound, the euro remains vulnerable while GBP/EUR holds above the old 1.1600–1.1630 resistance area. If sterling can continue to consolidate above that zone, the next phase could be less about a sharp breakout and more about whether euro buyers become comfortable treating 1.16 as a new floor rather than a ceiling.
Looking ahead
Wednesday: FOMC minutes will be the main event for dollar markets, with traders looking for evidence of how strongly the Fed is still leaning against inflation after the weaker jobs report.
Thursday: UK and eurozone calendars are lighter, leaving sterling and the euro more sensitive to bond yields, energy prices and central-bank commentary.
Friday: Market focus is likely to remain on whether GBP/EUR can hold above 1.17 and whether GBP/USD can sustain a break through the 1.34 area.
Market focus: Fed minutes, oil prices, Middle East headlines, UK gilt stability, and whether sterling can defend its recent breakout against the euro.