EUR/GBP remains subdued around 0.8500 due to US-UK trade deal hopes, BoE decision in focus

EUR/GBP struggles on hopes that the Trump administration may soon announce a trade agreement with the United Kingdom.
The BoE is widely expected to deliver a 25 basis point rate cut, but traders seek signals on the outlook.
Germany’s trade surplus rose sharply to EUR 21.1 billion in March, beating expectations of EUR 19.1 billion.

Akhtar Faruqui FXStreet

EUR/GBP is extending losses for the fourth consecutive session, trading near 0.8500 in early European hours on Thursday. However, the currency cross is coming under pressure as the Pound Sterling (GBP) strengthens on speculation that the Trump administration may soon announce a trade agreement with the United Kingdom.

According to “The New York Times”, citing three sources, US President Donald Trump is expected to unveil the deal on Thursday. Trump teased the announcement Wednesday night, posting: “Big News Conference tomorrow at 10:00 A.M., The Oval Office, concerning a MAJOR TRADE DEAL WITH REPRESENTATIVES OF A BIG, AND HIGHLY RESPECTED, COUNTRY. THE FIRST OF MANY!!!”

Market attention now shifts to the Bank of England’s (BoE) interest rate decision, also due Thursday. A 25 basis point rate cut is widely anticipated, but investors will be watching for signals on future easing, particularly in light of trade optimism.

Meanwhile, Germany’s trade surplus rose sharply to EUR 21.1 billion in March, up from a revised EUR 17.9 billion in February and beating expectations of EUR 19.1 billion. Exports climbed 1.1% MoM to EUR 133.2 billion—an 11-month high—while imports unexpectedly fell 1.4% to EUR 112.1 billion.

Despite recent GBP strength, downside in the EUR/GBP cross may be limited as the Euro (EUR) could find support following political developments in Germany. Conservative leader Friedrich Merz was sworn in as Chancellor in a second attempt, after narrowly missing the required majority in the initial vote.

Economic Indicator

BoE Interest Rate Decision

The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.