Published date: 12 May 2025

GBPEUR

GBP/EUR continues to make gains on a mixture of improved macro risk sentiment helping
sterling push higher, and recent euro longs to roll out of their positions as the US/China trade
war softens. The euro had become the main beneficiary of the ‘sell America’ theme and is
therefore suffering slightly more than sterling on a partial unwind of this theme.

GBPUSD

GBP/USD is retracing in a typical fashion after stalling at major technical resistance last week. Price action is dominated by dollar themes, with a softening stance between the US and China prompting a bounce in risk sentiment and thus a commensurate bounce in the dollar, which is squeezing the large dollar-short position in the market. Core US CPI (inflation), alongside retail sales and US/China announcements, will be consequential this week for the prospect of further dollar strength.

EURUSD

EUR/USD has been trending higher and attracting significant long positioning in recent months. The risk to this upside momentum has always been that even a temporary improvement in sentiment toward US assets to elicit a correction. We are now seeing this play out amid the softening US/China tariff stance. Several US data releases this week, along with any US/China headlines, will dictate the extent of the downside move, but a test of 1.1012 seems plausible.