Germany's inflation exceeded expectations, pushing up the euro. The political turmoil in France and the Bank of England's stance supported the pound. EUR/GBP fluctuated at 0.8660.
2025-09-01 15:18:24
EUR/GBP rose to 0.8660 in early European trading on Monday, supported by better-than-expected German inflation data. Germany's CPI rose 2.2% year-on-year in August, beating market expectations of 2.1% and the previous reading of 2.0%. The HICP rose to 2.1% year-on-year, also exceeding market expectations.
The data increased market uncertainty about the ECB's policy path, with investors reassessing the possibility of future interest rate cuts.
The domestic political situation in France has once again become a focus of market concerns. French Prime Minister François Bayrou will face a confidence vote on September 8, and it is expected that he may not be able to pass it.
Market surveys indicate that a majority of French citizens favor early national elections, suggesting continued political uncertainty. This backdrop could put additional selling pressure on the euro. The market is also closely watching the upcoming release of the eurozone's preliminary HICP data for August, which will be crucial in determining the euro's future trajectory.
On the other hand, recent strong UK economic data has dampened market expectations for a Bank of England interest rate cut this year. Catherine Mann, a member of the Bank of England's Monetary Policy Committee, said last week that given the persistence of inflationary pressures, she is more inclined to maintain interest rates at their current level for a longer period of time.
This stance supports the pound in the short term, limiting the upside potential of EUR/GBP.
From a technical perspective, EUR/GBP faces short-term resistance around 0.8660, and if it breaks through, it may further test the 0.8700 mark. However, if French political uncertainty intensifies and the Bank of England maintains a hawkish stance, the currency pair may fall back to the 0.8600 support range.
Overall, market sentiment is still caught in a tug-of-war between the positive fundamentals of the euro and the negative political risks.
Editor's opinion:
The current trend of EUR/GBP reflects a dual game: the unexpected rise in German inflation has strengthened the euro, but French political risks and the hawkish stance of the Bank of England have limited the euro's rise.
In the coming days, if the overall inflation data of the eurozone remains high, EUR/GBP may briefly break through 0.8700, but if the political situation in France deteriorates, the cross may quickly give up its gains and return to the 0.8600 range.
The data increased market uncertainty about the ECB's policy path, with investors reassessing the possibility of future interest rate cuts.
The domestic political situation in France has once again become a focus of market concerns. French Prime Minister François Bayrou will face a confidence vote on September 8, and it is expected that he may not be able to pass it.
Market surveys indicate that a majority of French citizens favor early national elections, suggesting continued political uncertainty. This backdrop could put additional selling pressure on the euro. The market is also closely watching the upcoming release of the eurozone's preliminary HICP data for August, which will be crucial in determining the euro's future trajectory.
On the other hand, recent strong UK economic data has dampened market expectations for a Bank of England interest rate cut this year. Catherine Mann, a member of the Bank of England's Monetary Policy Committee, said last week that given the persistence of inflationary pressures, she is more inclined to maintain interest rates at their current level for a longer period of time.
This stance supports the pound in the short term, limiting the upside potential of EUR/GBP.
From a technical perspective, EUR/GBP faces short-term resistance around 0.8660, and if it breaks through, it may further test the 0.8700 mark. However, if French political uncertainty intensifies and the Bank of England maintains a hawkish stance, the currency pair may fall back to the 0.8600 support range.
Overall, market sentiment is still caught in a tug-of-war between the positive fundamentals of the euro and the negative political risks.
Editor's opinion:
The current trend of EUR/GBP reflects a dual game: the unexpected rise in German inflation has strengthened the euro, but French political risks and the hawkish stance of the Bank of England have limited the euro's rise.
In the coming days, if the overall inflation data of the eurozone remains high, EUR/GBP may briefly break through 0.8700, but if the political situation in France deteriorates, the cross may quickly give up its gains and return to the 0.8600 range.
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