What drives the euro to pound pair?

The EUR/GBP rate is influenced primarily by central bank policies, economic data, political stability, and external market trends. Understanding these factors can help traders anticipate potential movements in the pair.

Interest rate differentials

Monetary policy decisions by the Bank of England (BoE) and the European Central Bank (ECB) can significantly affect EUR/GBP movements. If the ECB signals a more hawkish stance or tightens policy relative to the BoE, capital flows may favour euro-denominated assets, potentially strengthening the euro against the pound. 

Conversely, if UK rates are higher, sterling may find support as investors seek greater returns. Traders closely monitor GDP growth, CPI inflation, employment data, purchasing managers’ indices (PMIs), and wage growth, as these indicators influence central bank actions and market expectations.

Economic fundamentals

Economic indicators such as GDP growth rates, inflation figures (CPI), and trade balances directly affect EUR/GBP. Stronger-than-expected eurozone data can enhance the appeal of the euro, while resilient UK data may support the pound. 

For instance, if eurozone growth or inflation outpaces expectations, markets may anticipate tighter ECB policy, underpinning the euro and pushing EUR/GBP higher. Similarly, positive surprises in UK data could lend support to sterling, resulting in a lower EUR/GBP rate.

Geopolitical conditions

Government policies and political stability indirectly influence EUR/GBP. Pro-business policies, trade agreements, and stable governance typically increase currency confidence. Political uncertainty or abrupt policy shifts, however, can trigger volatility. The UK has signed trade agreements with several major economies in recent years, though a comprehensive deal with the US has not yet been concluded. 

Ongoing discussions and agreements with the eurozone and India have contributed to market sentiment, but traders remain vigilant to political developments.

External market trends

Stock market performance and global risk sentiment also influence EUR/GBP exchange rates. In periods of market optimism, investors may favour higher-yielding or riskier assets, which could benefit the pound if UK assets are attractive. 

In contrast, during bouts of risk aversion, flows may move into perceived safe havens such as the US dollar or Swiss franc, though the euro can also benefit given the size and relative stability of the eurozone. Commodity market swings may have an indirect effect on the pair, particularly where they impact risk sentiment or sectors tied to the UK or eurozone economies.

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July 9, 2025 – Written by James Fuller

STORY LINK Pound to US Dollar Forecast: GBP/USD Faces Critical Tests Ahead

The Pound to Dollar exchange rate (GBP/USD) dipped to 2-week lows at 1.3530 on Tuesday before recovering ground, but failed to hold above 1.3600 and traded just below this level.

Sustained losses below 1.3550 would trigger fresh speculation that the Pound has peaked.

According to UoB; “Downward momentum continues to build, albeit not by much. That said, the likelihood of GBP dropping to 1.3510 is increasing. Overall, only a breach of 1.3680 (‘strong resistance’ level was at 1.3700 yesterday) would indicate that the current downward bias has faded.”

Scotiabank remains bullish on the GBP/USD outlook, but uneasy over recent moves; “we look to a near-term range defined by 1.3550 support and 1.3650 resistance.”

Longer-term Bank of America is still forecasting GBP/USD will strengthen to 1.41 at the end of 2025.

Markets remain wary over the UK fiscal position. Confidence in the UK bond market remains fragile with the 10-year yield trading above 4.60% which will maintain upward pressure on debt-servicing costs.

If global bond yields continue to increase, there will be further upward pressure on UK debt-servicing with the risk of further bond selling and a doom loop.

According to ING; “We find it difficult to find factors that would bring a halt to the strong upward momentum in 30Y global rates from a structural perspective. The fiscal concerns are broad-based, with also the US and UK worrying investors.”

Scotiabank added; “market participants remain concerned about domestic political developments and ongoing uncertainty related to the fiscal outlook as UK yields hit fresh highs.”

Global turbulence sparked by US tariff policies would pose further risks.

In its latest Financial Stability Report (FSR) the Bank of England warned over damage from global trade wars.

Bank of England Governor Bailey commented; “There has been a notable change in the usual correlation patterns between the dollar and other US assets, including equities and government bond yields.”

He added; “And given these developments, the risk of sharp falls in risky asset prices, abrupt shifts in asset allocation and a more prolonged breakdown in historical correlations remains high, and vulnerabilities in market-based finance could amplify such moves which could impact the availability and cost of credit here in the UK.”

Federal Reserve policy will be a key element, especially with President Trump intensifying his attacks on Chair Powell and calling for his immediate resignation.

At this stage, markets see only around a 5% chance that rates will be cut this month with the chances of a September cut declining to around 65%.

Market pricing could change sharply if political pressure on the Fed escalates and Trump nominates a very dovish candidate to replace Powell.

Standard Chartered did note that any controversial nominations could face a tough Congressional battle; “Any future board nominee has to get through the Senate Finance Committee where Republicans have a one-vote majority.”

It added; “Thom Tillis, a conservative Republican senator on the committee, voted against the fiscal package and will not be running for re-election in 2026. He is unlikely to give a pass to a candidate he considers unqualified.”

MUFG noted that the Fed debate has been damaging; “These developments are all factors that have been undermining investor confidence over recent months.”

The bank does consider that a considerable amount of dollar negatives have now been priced in; “It’s why we are forecasting a far more modest dollar decline in H2 (-2%) than the 10.7% drop in H1.”

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TAGS: Pound Dollar Forecasts

July 9, 2025 – Written by Tim Boyer

STORY LINK Euro to Dollar Forecast: Fed Changes to Drive EUR/USD Gains Above 1.20

The Euro to Dollar exchange rate (EUR/USD) dipped to 10-day lows just below 1.1700 on Tuesday before trading just above this level.

Tariff developments will remain a key short-term focus while the issue of Federal Reserve personnel and independence could have huge dollar implications.

UoB sees a significant shift; “The EUR strength from late last month has ended. While there has been no significant increase in downward momentum, the current pullback in EUR could extend to 1.1660.”

On a medium-term view, Danske Bank expects Fed changes will contribute to EUR/USD gains to above 1.20.

The US and EU are continuing trade negotiations with an element of confidence that some form of framework deal will be agreed over the next few days.

The agricultural sector will inevitably be a very contentious element and could trigger a breakdown in negotiations with the US imposing a tariff level.

There would be mixed market implications with damage to the US and Euro-Zone economies.

According to ING; “Tariffs on the EU would mark an important escalation that can also harm the dollar, offsetting the hit on the euro. Anyway, the market’s baseline will probably remain that a EU-US deal should be agreed by the 1 August deadline, and EUR/USD may not drift far from the 1.16-1.18 area unless US data surprise in either direction.”

Uncertainty will still a key market element.

Kyle Rodda, senior financial markets analyst at Capital.com commented; “The delay in the imposition of new tariffs on some of the U.S.’s major trading partners to August 1 has simultaneously kicked the proverbial can down the road and supported the notion that the loftier tariff rates are a negotiating ploy.”

He added; “As a result, the markets have been left hanging, and waiting for a stronger catalyst to drive the next move.”

Ray Attrill, head of FX strategy at the National Australia Bank noted; “The market’s second take on the reciprocal tariff announcements was actually dollar negative on the view that there was as much harm, or more harm, going to be inflicted on the U.S. from these actions as elsewhere.”

He also focussed on uncertainty; “It makes markets reluctant to take a kind of positional view as to how this may play out, given uncertainty still reigns.”

Federal Reserve minutes from the June policy meeting will be released later on Wednesday.

“According to ING; “The consensus expectation is probably that two members, Bowman and Waller, will have flagged their dissent at the meeting before delivering dovish comments to the media a few days later. But if the minutes show a greater dovish front, then the dollar could take a hit as the bar for data to justify a summer cut would be lower.”

Wider Federal Reserve developments could also be a key element for currency markets and the dollar.

President Trump has stepped-up his criticism of Fed Chair Powell and called for him to resign immediately.

There is also evidence that Trump will open up a potential route to get Powell dismissed by accusing him of misleading Congress.

There have also been reports that Administration economic advisor Hassett is a main contender to replace Powell.

Fears over a politicised Fed could cause major dollar damage.

Danske Bank focussed on a potential lack of experience if there are big changes; “the USD historically trades weaker when experience in the Federal Reserve board drops and that will likely happen over the coming year.”

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TAGS: Euro Dollar Forecasts

July 9, 2025 – Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Price Flat as Markets Await FOMC

The Pound US Dollar exchange rate was trapped in a narrow range on Wednesday ahead of the release of the US’s latest FOMC minutes.

At the time of writing, GBP/USD was trading at approximately $1.3582, virtually unchanged from the start of Wednesday’s session.

The US Dollar (USD) trended lower on Wednesday, coming under pressure ahead of the Federal Reserve’s latest meeting minutes.

Sentiment towards the ‘Greenback’ soured earlier in the session following the announcement of fresh tariffs by President Donald Trump, which unsettled markets and added to trade policy uncertainty.

With a slight improvement in risk appetite also curbing demand for the safe-haven currency, USD struggled to attract support as investors looked ahead to the FOMC’s upcoming meeting minutes.

The Pound (GBP) found its footing on Wednesday, rebounding from earlier losses despite another quiet day on the UK economic calendar front.

Sterling’s mid-week recovery followed Tuesday’s slide, which was sparked by a downbeat fiscal forecast from the Office for Budget Responsibility (OBR).

The UK’s fiscal watchdog projected that UK government debt could climb to 270% of GDP by the 2070s, citing rising borrowing costs and mounting fiscal challenges.

Despite these concerns, the Pound managed to stabilise as markets appeared to take the long-term warning in stride, with broader risk sentiment helping to cushion GBP’s losses.

Looking ahead to Thursday’s European session, movement in the GBP/USD exchange rate will likely hinge on the Federal Reserve’s latest meeting minutes, released late on Wednesday.

Markets will be combing through the minutes for fresh insight into the Fed’s monetary policy outlook.

If policymakers strike a dovish tone and signal that rate cuts remain on the table, the US Dollar could find renewed support.

Meanwhile, with no UK economic data scheduled for release, the Pound is expected to remain at the mercy of external drivers.

In the absence of domestic catalysts, broader market sentiment will likely continue to guide GBP direction.

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TAGS: Pound Dollar Forecasts

• GBP/USD fluctuates at around 1.3600 in the European session on Wednesday.
• Technical sellers could remain interested once 1.3600 is confirmed as resistance.
• An improving risk mood could help the pair limit its losses.

GBP/USD recovered after setting a two-week low and closed virtually unchanged on Tuesday. The pair moves up and down in a narrow band at around 1.3600 midweek, while the technical picture doesn’t offer any signs of a steady recovery.

The uncertainty surrounding the United States’ trade relations and their potential impact on growth and inflation outlook causes markets to cling to a cautious stance. In turn, the US Dollar (USD) finds demand as a safe-haven and stays resilient against its rivals.

US President Donald Trump said late Tuesday that the BRICS members will be subject to 10% tariff rate and added that they will be introducing tariffs on pharmaceuticals and semiconductors soon. Meanwhile, US Commerce Secretary Howard Lutnick said that another 15 to 20 tariff letters are expected to be announced in the next two days.

In the second half of the day, the Federal Reserve will release the minutes of the June policy meeting. Following the upbeat June employment data from the US, the probability of the Fed cutting the policy rate by 25 basis points in July dropped to nearly 5% from about 25%, as per CME FedWatch Tool. Hence, the publication is unlikely to alter market expectations in a significant way.

Investors will continue to pay close attention to the risk perception. After trading flat earlier in the session, US stock index futures turned positive on the day. A bullish opening in Wall Street could hurt the USD and open the door for a rebound in the near term.

GBP/USD Technical Analysis

The 100-period Simple Moving Average (SMA) on the 4-hour chart aligns as a pivot level at 1.3600. In case GBP/USD confirms that level as resistance, 1.3570 (200-period SMA) could be seen as the next support level before 1.3540 (lower limit of the ascending channel, Fibonacci 38.2% retracement of the latest uptrend) and 1.3500 (static level, round level).

On the upside, 1.3630 (Fibonacci 23.6% retracement) could be seen as the first resistance level ahead of 1.3660 (50-period SMA) and 1.3700 (mid-point of the ascending channel).

• The USD/JPY forecast indicates brief relief for the yen after a steep decline.

• The yen has weakened significantly following Trump’s announcement of a 25% tariff on Japanese goods.

• Market participants are awaiting the release of the FOMC meeting minutes.

The USD/JPY forecast indicates brief relief for the yen after a steep decline due to tariff concerns. However, the outlook for Japan’s economy has darkened following Trump’s threat of a 25% reciprocal tariff. 

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The yen has weakened significantly this week following Trump’s announcement of a 25% tariff on Japanese goods, effective from August. The move came after trade talks between the US and Japan failed. Market participants are concerned that this could be the start of a trade war between the two partners. Such an outcome would hurt both economies and weaken their currencies. 

However, at the moment, the dollar is rallying at the prospect of higher import costs. These might translate to higher inflation, forcing the Fed to keep interest rates high. 

Furthermore, Trump has threatened a 50% tariff on copper imports that would again ignite tensions with many countries. In the short term, tariffs might be bullish for the dollar. However, in the long run, they might dim the outlook for the US economy and hurt its currency. 

Elsewhere, market participants are awaiting the release of the FOMC meeting minutes. The report might contain clues about future policy moves. However, with tariff uncertainty, the outlook might become less clear.

USD/JPY key events today

USD/JPY technical forecast: Rally pauses for breath at the 147.01 level

On the technical side, the USD/JPY price has finally paused its steep rally near the 147.01 key level. However, the bullish bias remains strong, with the price well above the 30-SMA and the RSI near the overbought region.

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After such a strong move, bulls have paused for a breath at this level. Therefore, the price might consolidate as the SMA catches up. At the same time, it might pull back to retest the SMA as support. The bullish bias will remain as long as it stays above the SMA. 

After a pause, bulls might regain momentum to break past the 147.01 level for a new high. Such a move would allow USD/JPY to retest the 148.02 key resistance. A break above would solidify the bullish bias.

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• EUR/USD trades near 1.1700 in the European session on Wednesday.
• The technical outlook points to a bearish tilt in the short term.
• The Federal Reserve will publish the minutes of the June policy meeting.

EUR/USD struggles to hold its ground early Wednesday and trades in negative territory at around 1.1700 after posting small gains on Tuesday. The near-term technical outlook highlights a lack of buyer interest.

The US Dollar (USD) continues to benefit from safe-haven flows as investors assess the latest talks surrounding the US trade regime.

US Commerce Secretary Howard Lutnick said late Tuesday that another 15 to 20 tariff letters are expected to be announced in the next two days. Meanwhile, US President Donald Trump noted that the BRICS members will be subject to 10% tariff rate and added that they will be introducing tariffs on pharmaceuticals and semiconductors soon. Regarding the trade negotiations with the EU, Trump said that the EU is treating them “very nicely” and added that they are “probably two days off” from sending the EU letter.

In case the EU and the US manage to reach an agreement until Trump unveils the tariff decision on European imports, the Euro could gather strength with the immediate reaction. On the other hand, investors are likely to refrain from positioning themselves for a steady recovery in the Euro, while the uncertainty lingers.

Later in the day, the Federal Reserve (Fed) will publish the minutes of the June policy meeting. Nevertheless, investors could ignore this publication and remain focused on trade-related headlines.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and EUR/USD continues to trade below the 20-period and the 50-period Simple Moving Averages (SMA), which made a bearish cross on Tuesday.

On the downside, 1.1700-1.1690 (static level, round level, lower limit of the ascending channel) aligns as a key support area ahead of 1.1660 (100-period SMA) and 1.1600 (static level, round level). Looking north, resistance levels could be seen at 1.1750-1.1760 (20-period SMA, 50-period SMA), 1.1800 (round level, static level) and 1.1830 (static level).

Copper prices are under strong positive pressures, which allows it to surpass the barrier at $5.1000, to notice forming a strong bullish rally and achieving big gains by hitting $5.8100 level, forming an intraday rebound to $5.5500 to catch its breath and gather some gains.

Note that the price is surrounded by several positive factors that support the continuation of the positivity, such as the unionism of the main indicators by providing positive momentum besides forming extra support at $5.3200 level, which makes us prefer more of the bullish attempts that target 2.00%Fibonacci extended level at $5.9720, to approach from the resistance of the main bullish channel that appears in the above image.

The expected trading range for today is between $5.4500 and $5.9800

Trend forecast: Bullish

Copper prices are under strong positive pressures, which allows it to surpass the barrier at $5.1000, to notice forming a strong bullish rally and achieving big gains by hitting $5.8100 level, forming an intraday rebound to $5.5500 to catch its breath and gather some gains.

Note that the price is surrounded by several positive factors that support the continuation of the positivity, such as the unionism of the main indicators by providing positive momentum besides forming extra support at $5.3200 level, which makes us prefer more of the bullish attempts that target 2.00%Fibonacci extended level at $5.9720, to approach from the resistance of the main bullish channel that appears in the above image.

The expected trading range for today is between $5.4500 and $5.9800

Trend forecast: Bullish

• USD/JPY breaks past 146.80 as forecasted, validating the Fair Value Gap structure and liquidity sweep play.
• Tariff-driven yen weakness and fragile Japanese data fuel continued upside pressure into key resistance.
• The technical outlook favors bulls, with 147.00 and 148.00 in focus as long as price holds above 145.80 and FVG remains intact.

Yen weakens on renewed tariff pressure

USD/JPY traded sharply higher this week, fueled by renewed trade tensions and technical tailwinds. On July 7–8, the U.S. announced plans for 25% tariffs on Japanese and South Korean imports, set to take effect August 1. While not final, the announcement triggered an immediate market reaction. Check this out for reference: Forex, indices, Gold weekly gameplan: Technical analysis and price action outlook.

The result? The Japanese yen slid to multi-week lows as USD/JPY surged toward 146.90, fueled by:

• Tariff-induced yen weakness.
• Safe-haven support for the US Dollar.
• Technical reclaim of structure and bullish imbalance zones.

Meanwhile, Japan’s economic backdrop remains fragile. Q1 GDP showed contraction, real wages declined, and consumer sentiment weakened—all compounding yen softness and raising concerns ahead of Japan’s July 20 elections.

High-impact news driving USD/JPY

These developments amplify the macroeconomic narrative driving USD/JPY:

• Weak yen fundamentals.
• Hawkish U.S. tone with risk-averse global positioning.
• Key resistance zones now under threat of breakout.

Forecast vs actual – Bullish scenario played out perfectly

In our prior analysis – EUR/USD, Gold, Nasdaq, Bitcoin forecast and more, breakout trading setups -, we outlined a bullish Smart Money structure built around a 4-Hour Fair Value Gap Level resting between 143.934-144.608, a sweep of previous highs at 145.00, and a continuation rally past it.

Actual market reaction

• Price swept highs at 145.00 after bouncing off from the 4-Hour Fair Value Gap Level resting between 143.934-144.608.
• USD/JPY then surged beyond 146.80 as projected.

This confirms the renewed strength of the U.S. dollar over the Yen’s dovish stance.

Technical outlook

USD/JPY has reclaimed its bullish trajectory, now sitting near its highest level since early June.

Bullish scenario – In progress

A break and hold above 147.00 could open the path toward multi-month highs. We could see further upside as long as:

• The 4-Hour Fair Value Gap between 146.280-146.631 remains intact.
• Price does not close below the immediate low at the 145.80 level.
• The Fed’s tone remains hawkish.

Targets:

• 147.00 – Next Psych Level.
• 148.00 – June High.

Bearish scenario

As the rally looks over-extended and over-stretched, this could pose a risk for downside as profit-taking takes place. We could see signs of weakness if:

• The 4-Hour Fair Value Gap between 146.280-146.631 gets closed down
• Failure to remain and break the 145.80 level
• A dovish Fed + July election sentiment

The USD/JPY rally played out almost identically to the forecasted Smart Money setup, reclaiming the Fair Value Gap, executing a sweep, and continuing higher.

With U.S. tariff risk pressuring Japan and institutional bullish structure now active, the path of least resistance leans toward a breakout. But traders should stay alert for event-driven volatility around FOMC and Japanese elections in the coming days.