EUR/GBP Market Outlook: Euro Slides Against Pound Despite US Tariff Delay

Market Sentiment Overview

The euro has continued its downward slide against the British pound, trading below the 0.8400 threshold, even as global risk sentiment modestly improved following US President Donald Trump’s decision to delay 50% tariffs on European Union imports until July 9. This seemingly supportive geopolitical development was not enough to lift the euro, as the common currency came under pressure from weaker euro area data and cautious ECB policy expectations. Meanwhile, the pound has benefited from surprisingly resilient UK economic indicators, a hawkish tilt from the Bank of England, and broad demand for undervalued GBP pairs.

The euro’s decline reflects deeper regional concerns. Eurozone PMI figures released last week showed deceleration in manufacturing and services across Germany and France, casting doubt on Q2 growth momentum. On the other hand, the UK economy surprised with stronger-than-expected retail sales and stickier inflation, fueling market speculation that the BoE could delay any near-term rate cuts. This divergence in fundamentals continues to support sterling appreciation versus the euro.

Investors are now focusing on Germany’s CPI figures and Eurozone confidence surveys scheduled for later this week, while in the UK, BoE Governor Bailey’s upcoming testimony and comments from Monetary Policy Committee members are likely to influence short-term expectations for monetary tightening.

Technical Analysis – EUR/GBP (1H Chart)

EUR/GBP is currently trading near 0.8398, hovering just above the key 61.8% Fibonacci retracement level at 0.83986. Despite a brief consolidation, the pair remains in a clear descending trend channel, with both the 20- and 50-period weighted moving averages above current price levels, reinforcing bearish structure.

• Key Resistance Levels:
  • 0.84085 (Fibonacci 0%)
  • 0.8414 (WMA)
• Key Support Levels:
  • 0.83881 (127.2% Fibonacci extension)
  • 0.83826 (161.8%)
  • 0.83765 (200%)

Indicators:

RSI: Currently at 42.9, indicating bearish momentum but not yet oversold.

MACD: Flat near the zero line, with no strong bullish crossover yet, suggesting continued downward pressure.

Unless the euro can reclaim the 0.8408 resistance zone and break above the moving averages, the technical bias remains tilted toward further downside. A break below 0.8382 could accelerate losses toward the 0.8376 handle.

Key Events to Watch This Week:

• May 28: Germany CPI (Prelim)
• May 29: Eurozone Economic Sentiment, Consumer Confidence
• May 30: BoE Gov. Bailey speaks

Conclusion

The recent weakness in the euro against the pound is not simply a result of external geopolitical relief, such as the US tariff delay, but stems from eurozone-specific economic stagnation and diverging central bank policy trajectories. As UK data continues to surprise to the upside and the BoE stays vigilant against inflation, the EUR/GBP cross remains vulnerable to downside moves unless incoming EU data offers a credible catalyst for reversal.

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