EUR\/GBP rose for a second day on Tuesday as the Pound weakened, keeping the pair near 0.8700. It was trading around 0.8712, below resistance between 0.8720 and 0.8745.<\/p>\n
Sterling was among the weakest major currencies this week after reports about links between the UK ambassador to the US, Lord Mandelson, and Jeffrey Epstein. Political pressure on Prime Minister Keir Starmer has increased, and UK shares and government bonds were also lower.<\/p>\n
On the daily chart, EUR\/GBP sits near the top of a descending channel that began after mid-November highs. Momentum indicators are slightly positive, with the MACD histogram expanding and the RSI at 55.<\/p>\n
A move above 0.8720 and then above the December 31 and January 21 highs near 0.8745 would point to a change in direction. If that happens, the next area watched is around 0.8800, near December\u2019s peak.<\/p>\n
Support levels are at 0.8675, then 0.8612. The technical section was produced with help from an AI tool.<\/p>\n
We are seeing significant pressure on the British Pound, driven by the political uncertainty surrounding the Labour cabinet and the Mandelson affair. The yield on the UK 10-year Gilt has jumped 15 basis points in the last week to 4.35%, reflecting investor nervousness selling off UK government debt. This political risk premium is keeping the EUR\/GBP pair elevated just below key technical resistance.<\/p>\n
For derivative traders, this situation points towards buying short-dated EUR\/GBP call options to speculate on a breakout. A strike price just above the 0.8750 level would capture upside momentum if the pair pushes through the descending channel mentioned in the technical analysis. Implied volatility in the pair has risen to a three-month high of 8.2%, so timing the entry will be key to managing the cost of the option premium.<\/p>\n
However, we must also consider the risk of a political resolution, which could cause a sharp snap-back in the Pound\u2019s value. Looking back to the market reaction during the UK’s “mini-budget” crisis of 2022, we saw how quickly sentiment can reverse on a change in leadership or policy. A hedge using protective GBP call \/ EUR put options with a strike near the 0.8650 support level could be a prudent move.<\/p>\n
This weakness in Sterling is also spilling over into other pairs, with GBP\/USD breaking below the key 1.2500 support level for the first time this year. We will be watching next week\u2019s UK inflation report very closely, as the last release from January 2026 showed core inflation remaining stubbornly high at 3.5%. Any sign that inflation is not falling as expected could add another layer of complexity for the Bank of England and the Pound.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/GBP rose near 0.8700 as political pressure weakened Sterling; breakout above 0.8745 targets 0.8800.<\/p>\n","protected":false},"author":62,"featured_media":17037,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41464","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/41464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=41464"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/41464\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/17037"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=41464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=41464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=41464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}