The Euro weakened against the British Pound as geopolitical tensions and renewed US trade tariffs weighed on investor sentiment. EUR/GBP is trading at 0.8729, down 0.14%, with limited support from economic data in both the Eurozone and the UK.
Key Drivers Behind the Decline
- Rising Geopolitical Risks: NATO has issued a stern warning to Russia following an airspace violation over Estonia. European officials, according to Bloomberg, have privately communicated their willingness to intercept Russian aircraft, viewing the incident as a deliberate provocation. This heightened geopolitical tension has put pressure on the Euro.
- ECB Consumer Expectations Survey: The latest survey showed households expect 1-year inflation at 2.8%, while 5-year expectations ticked up slightly from 2.1% to 2.2%. The data suggests inflation expectations remain elevated, but not enough to spark a policy shift.
- US Tariffs on European Exports: Former US President Donald Trump has introduced a new wave of tariffs targeting Europe. These include:
- 100% tariffs on pharmaceuticals
- 50% on kitchen cabinets and bathroom vanities
- 40% on upholstered furniture
- 25% on heavy trucks
These tariffs increase pressure on key European export sectors, further dampening Euro sentiment.
- Light UK, Eurozone Economic Calendars: With no major UK data releases, traders continue to digest weak UK Flash PMIs from earlier in the week. Attention is now turning to November 26, when the UK government is set to unveil its budget.
Looking Ahead
Next week brings a busier schedule, with key data and events on the horizon:
Eurozone:
- Business Climate
- Consumer Confidence
- Economic Sentiment Indicator
- September inflation data
- Several ECB speakers
UK:
- GDP figures
- Speeches from Bank of England officials
EUR/GBP Technical Outlook
EUR/GBP remains near weekly highs but is showing signs of a potential pullback. A “dark cloud cover” candlestick pattern suggests a bearish reversal may be forming. The Relative Strength Index (RSI) is still bullish but trending lower, indicating weakening momentum.
- Key support levels:
- 0.8700
- 20-day SMA at 0.8686
- 50-day SMA at 0.8671
- Resistance levels:
- 0.8750
- 0.8800 if buyers regain control
A break below 0.8700 could trigger further downside, while reclaiming 0.8750 may open the door to higher levels.