EUR/GBP – Europe’s most prominent forex pair

The EUR/GBP pair is a forex pair consisting of the euro and the pound sterling (also commonly called the British pound). It’s one of the twelve forex pairs known as minors.

Forex pairs are split into three groups: majors, minors, and exotics. The first group is defined by having USD or the US dollar as one of the components. It’s also sometimes split into two smaller sub-groups based on trading volume.

Minors, the group our pairing belongs to, are pairs that don’t have the US dollar but are made out of two currencies from major world economies. Minor pairs can consist of the following currencies:

• EUR – Euro
• GBP – British Pound
• CHF – Swiss Franc
• JPY – Japanese Yen
• AUD – Australian Dollar
• CAD – Canadian Dollar
• NZD – New Zealand Dollar

How does the EUR/GBP value move?

Like any forex pair, the EUR/GBP’s value moves when the currencies consisting of it change values comparatively. And since these moves don’t have to be significant, the value is changing constantly.

In forex trading, the value of a pair rises when the base currency (the first in the pair) rises comparatively to the quote currency (the second one). In this case, the EUR shows a stronger performance than the GBP. The most obvious scenario of EUR/GBP, this happens when the euro rises and the pound sterling declines. However, it can also happen when the pound grows, if the euro’s growth is more significant.

Conversely, traders will see the pair’s value fall when the pound outperforms the euro.

What drives EUR/GBP value?

Some traders consider this pair difficult to evaluate since neither of the currencies is limited to a single territory. The Eurozone consists of multiple different countries, each affecting the euro. Similarly, while the UK has central institutions like the Bank of England and the Office of National Statistics, there are also reports for its constituent countries that may affect sentiment towards the pound.

Be that as it may, we’ve outlined some of the key reports to look out for when researching the pair:

Euro (EUR):

1. Gross Domestic Product (GDP) Reports by Eurostat: These reports indicate the health and growth of the EU economy by measuring cumulative economic output. It’s released quarterly.
2. Harmonised Index of Consumer Prices (HICP) by Eurostat: This index is an inflation indicator tracking price changes in goods and services.​ Eurostat publishes the index monthly, usually two weeks after the reference month.
3. Taxa de Desemprego by Eurostat: Shows the percentage of the labour force that remains unemployed. Indicates labour market strength and shifts in consumer spending potential. Eurostat shows unemployment rates monthly, normally a full month after the reference month.​
4. European Central Bank (ECB) Monetary Policy Statements: These outline the ECB’s conscious decisions on policy and inflation. They are somewhat irregular, but there are usually eight reports per year, normally falling on Thursdays.
5. Balance of Payments by Eurostat: This report shows details of the Eurozone’s transactions with the rest of the world and shows crucial data like trade balances and capital flows. This significantly affects currency demand, making it a key indicator.​ This is a monthly report but comes six weeks after the reference month.

British Pound (GBP):

1. Produto Interno Bruto (PIB) Reports by the Office for National Statistics (ONS): Analogous to Eurostat’s GDP report, this shows overall economic performance. There are monthly and quarterly reports, the former coming six weeks after the reference month, and the latter two months post-quarter. These reports often influence the EUR/GBP exchange rate, as they reflect the relative strength of the UK economy compared to the Eurozone.
2. Consumer Price Index (CPI) by the ONS: This is also an inflation tracking index, following the prices of a basket of goods and services. It is released during the third week after the reference month in normal circumstances.​
3. Taxa de Desemprego by the ONS: Again, a report similar to another one we mentioned previously. Available monthly, six weeks after the reference period.​
4. Bank of England (BoE) Monetary Policy Summaries: Provides insight into the BoE’s plans on inflation and monetary policy. Release about every six weeks, also on Thursdays.​
5. Balance of Payments by the ONS: Again, similar to the same report by Eurostat, this shows the UK’s transactions with other countries with trade balances and investment flows. The ONS releases it quarterly, 40 days after the end of each quarter.

For forex traders, reports in individual Eurozone member economies, especially France and Germany, are also crucial indicators.

EUR/GBP recent performance and developments

Let’s look at some key events for the EUR/GBP forex pair and the underlying drivers.

Euro shows strongest one-week performance since 2009

A combination of the EU’s announcement of a €800 billion defense plan and insecurity surrounding the dollar in the trading week from the 3rd to the 7th of March have resulted in the euro’s best performance in 16 years. Hopes for greater EU independence, weak job data, and concerns about Trump’s tariff policy—along with a disappointing US employment report—are likely driving the stronger currency valuation, particularly evident in the EUR/GBP exchange rate.

‘Trumpcession’ fears drive euro and pound spike

Fear of Trumpcession – a term coined to fear that Donald Trump’s economic policies could lead to recession – makes room for EUR and GBP growth. On the 12th of March, the EUR/USD rose by one cent, reaching the highest level since Trump’s victory. GBP/USD reached $1.2956, again, the highest performance since its election. Overall, the dollar has dropped by 0.6% against a basket of currencies, erasing all progress since the election.

Besides policy concerns, another driver is overall poor US economic performance. Key indicators are:

• US stock market decline, with the S&P 500 down 1.2% following a 2.7% drop on Monday.
• FTSE 100 falling 1.2%, with DAX and CAC losing 1.3%.
• UBS warns of a 30% chance of a US recession, up from 25%.

British pound lowers after GDP shrinks

On the 14th of March, the British pound shrunk, placing the EUR/GBP pair into the 0.84 range. This follows a disappointing GDP report, which recorded a 0.1% shrink instead of the projected 0.1% growth.

This follows a prior correction, where the BoE reassessed its original 0.4% growth forecast, lowering it to 0.1%. The decline mostly comes from weakness in the production sector.

Disclaimer: This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.