EUR/GBP traded near 0.8720 on Friday after rebounding from the 0.8700 area. It pulled back from one-month highs at 0.8740 and has moved sideways in the middle of the recent range.
The pair is nearly 0.5% higher on the week and almost 1% up over the past three weeks. Risk-off conditions linked to the war in Iran weighed on both the Euro and Pound against the US Dollar.
Momentum Signals Mixed
Eurozone manufacturing data and a modest rise in inflation supported the Euro earlier in the week. UK manufacturing PMI data did not provide support for Sterling.
Momentum signals are mixed. On the 4-hour chart, the RSI is 58, while the MACD is slightly below zero and the MACD line has crossed under the Signal line.
Support levels include 0.8705 and 0.8676, with a further area at 0.8630–0.8635. Resistance remains at 0.8740, with the next zone at 0.8790–0.8800.
Looking back at the analysis from April 2025, we can see the EUR/GBP pair was struggling to break the 0.8740 resistance level. The bullish momentum was already showing signs of weakening, even as the Euro found temporary support from manufacturing data. This consolidation ultimately preceded a longer-term shift in the market.
Policy Divergence Drives The Trend
Today, on April 3, 2026, the fundamental picture has changed considerably, with the pair trading at much lower levels. The key driver now is the divergence in monetary policy expectations between the European Central Bank (ECB) and the Bank of England (BoE). We see a higher probability of the ECB cutting interest rates before the BoE does, which puts downward pressure on the Euro relative to the Pound.
This view is supported by the latest inflation figures from March, which show Eurozone inflation falling to 2.4%, while UK inflation remains more stubborn at 3.4%. This data differential gives the BoE more justification to hold rates higher for longer. As a result, the dynamics we observed back in 2025 have been completely overturned by these macroeconomic realities.
For the coming weeks, we should consider strategies that capitalize on limited upside potential for the pair. Selling out-of-the-money call options or establishing bear call spreads could be effective ways to generate income from the view that significant rallies are unlikely. This strategy aligns with the fundamental headwinds facing the Euro due to the anticipated ECB rate cuts.
Alternatively, for those expecting further downside as central bank meetings approach, buying put options provides a clear, risk-defined way to position for a drop. The implied volatility around these meetings will be crucial to monitor when pricing these derivatives. We should remain alert for any change in tone from the BoE, as a surprise dovish shift could unwind this trade quickly.
