By Noam Bennaiche
Sterling was the strongest performing G10 currency yesterday, with GBP/EUR breaking above the resistance area that has capped the pair for much of 2026. After reaching a 12-month high on 1st July, the pair extended its gains yesterday.
Several factors have helped support Sterling. Although the gap between UK and Eurozone interest rates has narrowed following the ECB’s June hike, the Bank of England’s 3.75% Bank Rate still offers a meaningful yield advantage over the ECB’s 2.25% deposit rate. Recent comments from BoE Governor Andrew Bailey also reinforced expectations that UK interest rates cut are “off the table”, supporting demand for the Pound. Wednesday’s Consumer Price Index also showed Eurozone inflation dropped from 3.2% to 2.8% and core inflation from 2.6% to 2.4%. This cooling data prompted investors to scale back expectations of further ECB interest rate hikes, which left the Euro exposed.
On Wednesday, US Non Farm Payrolls report added further momentum for the Pound. The US economy only created 57,000 jobs in June, well below expectations of 110,000, and figures for April and May were also revised lower. Although the unemployment rate edged down to 4.2%, the weaker jobs data prompted a broad sell-off of the US Dollar, with GBP/USD climbing as well.
With US markets closing early yesterday ahead of today’s Independence Day holiday, trading conditions are likely to become quieter at the end of the week. Nevertheless, lower liquidity can sometimes lead to larger price swings, particularly if unexpected geopolitical or central bank headlines emerge. Only a speech by ECB President Lagarde in the morning and Governor Bailey in the afternoon are expected to take place. We also have PMI data released in a few European countries and in the UK before 9:30am.
The key question now is whether GBP/EUR can hold above those levels, which may now act as support, or whether some profit taking pulls the pair back after its recent rally. Looking ahead, attention will turn to the ECB meeting on 23rd July and the Bank of England’s decision on 30th July. Any changes in expectations for interest rates on either side could influence the next move. For now, Sterling has positive momentum, but whether it can build on these gains will depend on incoming economic data and central bank guidance over the coming weeks. Volatile markets move fast, and having the right protection in place can make all the difference. Speak to one of our experts today about fixing a rate or protecting your position, and make sure your money goes further.