EUR\/GBP has fallen about 1.5% since the Iran conflict began. The decline has been linked to a stronger GBP rate profile and resilient equity markets.<\/p>\n
The drop has also been associated with a hawkish repricing in UK rates. Equity market strength has reduced demand to switch from higher beta GBP to lower beta EUR.<\/p>\n
Short-term valuation measures suggest the move may be stretched. Oil prices have slipped back below $90.<\/p>\n
Lower oil could lead to a more dovish reassessment of UK rate expectations. This may support a corrective rise in EUR\/GBP towards 0.870 rather than a further move down to 0.860.<\/p>\n
The piece was produced using an AI tool and reviewed by an editor. FXStreet\u2019s Insights Team selects market observations from external experts and adds input from internal and external analysts.<\/p>\n
Looking back to the spring of 2024, we saw EUR\/GBP weaken significantly amid the tensions in the Middle East, falling roughly 1.5%. This move was largely driven by a more aggressive Bank of England rate profile compared to the European Central Bank, which proceeded with a rate cut in June 2024 while the BoE held firm at 5.25%. The resilience in equity markets at the time also favored the higher-yielding pound over the euro.<\/p>\n
At that point, with oil prices retreating below $90 a barrel, there was a view that the pair was oversold and due for a corrective bounce toward 0.870. However, that substantial correction failed to materialize throughout 2024 as fundamental policy divergence remained the dominant theme. The cross-rate instead continued to grind lower, even breaking below the 0.8400 level later that year.<\/p>\n
Given this history, derivative traders should be wary of positioning for a simple snap-back rally in the coming weeks. The key lesson from the past two years is that central bank policy divergence is the primary driver for this pair, often overpowering short-term technical signals. We believe that buying options to protect against further downside, such as purchasing puts, is a more prudent strategy than betting on a sustained rebound.<\/p>\n
For those still anticipating some upside, a bullish call spread could be a disciplined approach to consider. This would cap potential profits but significantly lower the initial premium paid, a valuable lesson for a pair that has consistently failed to sustain major rallies. This strategy allows for participation in a modest recovery while managing risk in case the long-term downtrend reasserts itself.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/GBP fell 1.5% on stronger GBP, hawkish UK rates, resilient equities; lower oil may lift pair.<\/p>\n","protected":false},"author":103,"featured_media":17034,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-51229","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\/51229","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\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=51229"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/51229\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17034"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=51229"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=51229"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=51229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}