EUR\/GBP recovered from earlier lows on Friday after Eurozone GDP figures met forecasts. The pair traded near 0.8717 after rebounding from the 0.8700 level.<\/p>\n
Eurostat said Eurozone GDP rose 0.3% quarter-on-quarter in Q4 2025, matching expectations and the prior reading. Annual GDP grew 1.4% in Q4, above the 1.3% forecast.<\/p>\n
Employment Change held at 0.2% quarter-on-quarter in Q4, above the 0.1% forecast. Annual employment growth was 0.6%, in line with expectations.<\/p>\n
ECB Governing Council member Gabriel Makhlouf said inflation is \u201cbasically on target\u201d and policy is in a good place. The data was also described as consistent with keeping policy unchanged.<\/p>\n
UK figures showed GDP grew 0.1% quarter-on-quarter in Q4, below the 0.2% expectation. Annual GDP growth slowed to 1% from 1.2%.<\/p>\n
BoE chief economist Huw Pill said policy should focus on underlying inflation, which he put closer to 2.5% than 2%. He said the stance remains restrictive and holding rates at current levels should be enough.<\/p>\n
Reuters reported that EUR\/GBP risk reversals rose to 78.8 basis points on Tuesday, the highest since late September.<\/p>\n
We are seeing a clear divergence emerge from last quarter’s economic data, creating a favorable setup for the Euro against the Pound. The Eurozone’s economy is performing as expected with a stable labour market, providing a solid floor for the currency. In contrast, the United Kingdom’s growth has disappointed, putting pressure on the Pound.<\/p>\n
The policy stances of the central banks are reinforcing this trend, which is crucial for our positioning. The European Central Bank is comfortable with its current policy, especially after January 2026’s inflation reading came in at 2.1%, right on target. The Bank of England, however, is signaling a dovish tilt due to the softer growth, even as underlying inflation remains a concern.<\/p>\n
The options market is telling a clear story, with risk reversals showing the strongest demand for Euro calls since last September. With one-month implied volatility for EUR\/GBP now sitting at a low 4.8%, it is relatively cheap to buy options that would profit from a rising exchange rate. This suggests we should consider positioning for further upside with defined risk.<\/p>\n
Given these factors, we should watch the 0.8700 level as a significant support zone following Friday’s bounce. Establishing long positions in EUR\/GBP, perhaps through call spreads, appears to be a logical response. If this divergence continues, a move towards the 0.8850 resistance level seen in late 2025 is a realistic target in the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/GBP rebounds after Eurozone GDP meets forecasts; UK growth disappoints, ECB steady, BoE restrictive stance maintained.<\/p>\n","protected":false},"author":62,"featured_media":17033,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41851","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-ca\/wp-json\/wp\/v2\/posts\/41851","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41851"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41851\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17033"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41851"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41851"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41851"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}