Key Moments
- EUR/GBP trades near 0.8720, up 0.38% on the day, supported by stronger Eurozone sentiment and a weaker Pound.
- The Eurozone Sentix Investors’ Sentiment Index climbs to 4.2 in February from -1.8 in January, its first positive reading since July.
- Political uncertainty in the United Kingdom and expectations of Bank of England rate cuts continue to pressure the Pound Sterling.
Euro Advances as Risk Sentiment in Eurozone Improves
EUR/GBP starts the week on a firm footing, trading around 0.8720 on Monday at the time of writing, representing a 0.38% daily gain. The cross is being driven higher by Euro (EUR) strength, underpinned by improving sentiment in the Eurozone, while the Pound Sterling (GBP) faces headwinds from domestic political and monetary policy concerns in the United Kingdom.
The Euro is drawing support from a marked rebound in investor confidence. The Eurozone Sentix Investors’ Sentiment Index moved up to 4.2 in February from -1.8 in January, registering its first positive print since July. The survey also points to firmer confidence in the German economy, amid expectations of a broader global stabilization helped by more robust growth in the United States and Asia.
ECB Maintains Cautious Policy Stance
Market participants are also focusing on remarks from European Central Bank (ECB) policymakers, including President Christine Lagarde. These communications are not expected to significantly shift the stance laid out at the latest monetary policy meeting. The ECB left its benchmark interest rate unchanged at 2% for the fifth meeting in a row, and Christine Lagarde reiterated that decisions would be guided by incoming data on a meeting-by-meeting basis, without any advance commitment to a defined rate trajectory. A Reuters survey conducted in January indicated that about 85% of economists anticipated interest rates would stay on hold for the remainder of the year.
Analysts at Societe Generale observe that the tone from several ECB officials has become more dovish since last week’s meeting. Some policymakers have highlighted growing downside risks to inflation, including potential disinflationary effects from Chinese imports, while others have cautioned that a pronounced appreciation of the Euro could elicit a policy reaction. Even so, with rates viewed as being close to neutral, the institution still sees a high threshold for reopening discussions on additional rate cuts.
Pound Pressured by UK Political Turmoil and Rate Cut Expectations
On the UK side, the Pound is being weighed down by renewed political tension. The resignation of Downing Street Chief of Staff Morgan McSweeney, following controversy around the appointment of Peter Mandelson as US ambassador, has revived concerns about the stability of the government. This episode, together with reports of a potential criminal investigation, has heightened political uncertainty and is putting pressure on the British currency.
At the same time, shifting expectations around Bank of England (BoE) policy are capping any upside for Sterling. Although the BoE recently kept its key interest rate steady at 3.75%, the number of Monetary Policy Committee (MPC) members voting to hold rates was lower than markets had anticipated. According to Dani Stoilova, UK and Europe economist at BNP Paribas Markets 360, the central bank could implement its next rate reduction as early as March, followed by an extended pause, with a terminal rate projected around 3% by mid-2027.
Euro Performance Against Major Currencies
The table below summarizes the Euro’s percentage changes today against the major currencies listed. According to this snapshot, the Euro has been strongest versus the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.32% | 0.10% | -0.30% | -0.04% | -0.01% | 0.24% | -0.41% | |
| EUR | 0.32% | 0.42% | 0.00% | 0.28% | 0.33% | 0.57% | -0.09% | |
| GBP | -0.10% | -0.42% | -0.43% | -0.16% | -0.10% | 0.14% | -0.51% | |
| JPY | 0.30% | 0.00% | 0.43% | 0.26% | 0.30% | 0.54% | -0.12% | |
| CAD | 0.04% | -0.28% | 0.16% | -0.26% | 0.04% | 0.28% | -0.37% | |
| AUD | 0.00% | -0.33% | 0.10% | -0.30% | -0.04% | 0.24% | -0.41% | |
| NZD | -0.24% | -0.57% | -0.14% | -0.54% | -0.28% | -0.24% | -0.66% | |
| CHF | 0.41% | 0.09% | 0.51% | 0.12% | 0.37% | 0.41% | 0.66% |
The heat map should be read using the base currency from the left-hand column and the quote currency from the top row. For instance, selecting the Euro as the base in the left column and moving to the US Dollar in the top row gives the percentage move for EUR (base)/USD (quote).
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
