Eurgbp To Remain Bearish

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Eurgbp To Remain Bearish

Eur/Gbp To Remain Bearish On Bleak Outlook

EUR/GBP remains mostly flat during the Tuesday session. The EUR/GBP appears to be catching its breath after a brutal 5-day losing streak.

As of now, EUR/GBP is trading near 0.8280, which is the 2.5-year low for the cross. The price-action of EUR/GBP is mostly driven by GBP resilience and weakness of EUR. From the smaller to the longer timeframes, the EUR/GBP is in consistent downtrend.

Eurozone At Risk Of Us Tariffs

At the heart of this weakness is the depreciation of the Euro due to fears that the US will impose tariffs under the new government. At the same time, Germany is experiencing political uncertainty, which is also bad for Euro.

According to experts, the Eurozone GDP is expected to decline by 0.3pp (minimum) on a cumulative basis during 2025 - 2026.

Meanwhile, the UK's interest rate is expected to remain higher than the Eurozone. At the same time, the UK's growth outlook is positive as compared to the Eurozone.

Over the long run, higher rates will benefit the GBP against the EUR. This means the EUR/GBP is at risk of more downside.

The bottom line is that the ECB is dovish, but the BoE is still somewhat hawkish. At the same time, the Eurozone is facing tariff threats which is making more headwinds for the Euro.

While the Euro is under pressure, the Pound is performing exceptionally well despite the geopolitical shocks. At the same time, GBP benefits from a risk-on environment, which is a key thing to remember.

So, a continuation of the rally in the US equities will actually help the Pound Sterling against the Euro. Looking ahead, the December meeting of the BoE will likely lead to no changes in the interest rate.

Once again, this will help the GBP as higher rates will attract foreign capital. Meanwhile, the ECB is intent on lowering the rates to spark growth in the Eurozone.

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