EUR/GBP Holds Steady Near 0.8750 as Political Jitters in London Weigh on Sterling

Warren Takunda

Traders' Opinions

Summary:

The EUR/GBP pair is trading firmly around 0.8750 as the British Pound weakens against the Euro.

BUY EURGBP

EXP

PENDING

0.87550

Entry Price

0.88500

0.87100

0.87611 +0.00151 +0.17%

Pips

PENDING

0.87100

Exit Price

0.87550

Entry Price

0.88500

The Euro firmed against a faltering British Pound in early European trading on Friday, with the cross hovering just above the 0.8750 handle as a potent cocktail of domestic political instability and growing conviction over imminent Bank of England rate cuts continued to sap sentiment toward UK assets.

Sterling is entering the weekend on the back foot after a seismic local by-election result sent shockwaves through the Westminster establishment. According to reports from The Guardian, the Green Party secured its first-ever Westminster by-election victory, snatching the seat of Gorton and Denton from the ruling Labour Party. The defeat is being interpreted not merely as a localized protest vote, but as a significant erosion of confidence in Prime Minister Keir Starmer’s leadership.

For traders, the political calculus is simple: a weakened mandate fuels speculation about internal party dissent and potential leadership challenges down the line. Political uncertainty, historically a bane for the Pound, injects a fresh layer of risk premia into the currency just as investors are already skittish about the UK’s growth trajectory.

The political headache compounds an increasingly dovish outlook for monetary policy. While markets have spent much of the year trying to pin down the exact timing of the Bank of England’s next move, the dial is shifting decisively toward an early cut. BoE Governor Andrew Bailey added fuel to the fire earlier this week, stating that a reduction in March remains a "genuinely open question." Although Bailey conceded that services inflation has been stickier than anticipated, his willingness to publicly entertain a spring move has been seized upon by the analyst community.

Heavyweight financial institutions are now aligning their forecasts accordingly. Economists at Deutsche Bank, ING, and UBS are all penciling in the next quarter-point reduction for either the March or April policy meeting. With the market pricing in an increasing probability of monetary loosening before the summer, the yield advantage that had long propped up the Pound is slowly eroding, making the currency less attractive against a Euro that, while facing its own growth struggles, is trading in a relatively higher rate environment for now.

Looking across the Channel, the immediate catalyst for the pair lies in the preliminary German Consumer Price Index (CPI) data due for release later this morning. As the Eurozone’s economic powerhouse, Germany’s inflation reading often sets the tone for the broader bloc.

Economists are watching the numbers closely for any signs of a sharper-than-expected deceleration. Should the data surprise to the downside, it would instantly amplify calls for the European Central Bank to accelerate its own easing cycle to prop up faltering growth. A more dovish ECB would, in turn, cap any significant Euro strength, potentially dragging the EUR/GBP pair back toward the recent lows.

For now, the cross remains trapped between two diverging central bank narratives, but the immediate pressure is undeniably on the Pound. With political noise increasing in London and the market firmly betting on a BoE move, Sterling will need a significant upside surprise in the data—or a sharp repricing of ECB expectations—to regain its footing.

Technical Analysis

From a technical perspective, EUR/GBP (4-hour chart) is transitioning into a constructive bullish structure after completing a broad basing phase near the 0.8650 region. Price action has formed a sequence of higher lows since early February, signaling accumulation and a gradual shift in control from sellers to buyers. The recent impulsive rally from the 0.8710 support zone reinforces the strengthening upside momentum.

On the 4-hour timeframe, price has broken back above the 0.8745–0.8755 resistance band, a former supply area that previously rejected advances. This breakout suggests a shift in market character, with prior resistance now acting as near-term support. The pair is currently trading around 0.8755, consolidating just above this reclaimed level. Holding above this zone keeps the immediate bullish bias intact.

The next major resistance sits near 0.8795–0.8800, a well-defined ceiling that capped price in January. A sustained push through this barrier would confirm a broader range breakout and likely accelerate momentum toward 0.8850, marking a continuation of the emerging uptrend. The projected move on the chart indicates potential for expansion toward that upper boundary if buyers maintain control.

On the downside, immediate support rests at 0.8745, followed by the more critical demand zone at 0.8715–0.8720. This region has acted as a strong pivot throughout February and represents structural support within the developing uptrend. A decisive break below 0.8715 would disrupt the higher-low sequence and expose 0.8680, with a deeper move potentially targeting 0.8650, the base of the broader range. Such a breakdown would shift the bias back to neutral and suggest the recent breakout was false.

Structurally, the pair is forming a bullish continuation pattern, with higher lows pressing into overhead resistance — typically a precursor to range expansion. The strength of the latest bullish impulse leg, characterized by strong-bodied candles and minimal pullback, suggests genuine buying interest rather than short covering alone.

Momentum conditions, inferred from price behavior, suggest expansion rather than exhaustion. Pullbacks remain shallow and corrective, while bullish impulses show increasing strength. This indicates improving upside momentum and reduces the likelihood of an immediate deep retracement.

Overall, the technical outlook favors continued upside while price holds above 0.8745, with confirmation of further gains on a sustained break above 0.8800.

TRADE RECOMMENDATION

BUY EUR/GBP

ENTRY PRICE: 0.8755

STOP LOSS: 0.8710

TAKE PROFIT: 0.8850

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EUR/GBP Holds Steady Near 0.8750 as Political Jitters in London Weigh on Sterling

Technical Analysis

Risk Disclosure