EUR/GBP muted after soft UK GDP, eyes turn to Eurozone data

EUR/GBP holds in a tight range as the Pound remains resilient despite weaker UK growth data.
Soft UK GDP figures reinforce expectations for a potential March rate cut from the Bank of England.
Focus shifts to Friday’s preliminary Eurozone GDP data, with ECB policymakers maintaining a broadly steady monetary policy outlook.

Vishal Chaturvedi FXStreet

EUR/GBP trades in a narrow range on Wednesday, with the British Pound (GBP) holding firm despite soft UK economic data, as broad-based US Dollar (USD) weakness continues to shape overall FX sentiment. At the time of writing, the cross is trading near 0.8710, with the Pound modestly outperforming the Euro (EUR).

Data released by the UK Office for National Statistics (ONS) showed that monthly Gross Domestic Product (GDP) rose by 0.1% in December, matching market expectations, after growth of 0.2% in November, which was revised down from an earlier estimate of 0.3%.

Preliminary figures also showed that the economy grew by 0.1% QoQ in the fourth quarter, undershooting expectations for a 0.2% increase and unchanged from the previous quarter’s pace. On an annual basis, GDP growth slowed to 1.0% in Q4, down from 1.2% previously and below market expectations, suggesting that the UK economy lost momentum toward the end of 2025.

The disappointing data has added to pressure on the Bank of England (BoE), with markets increasingly pricing in the possibility of an interest-rate cut as early as March.

Attention now turns to preliminary Eurozone GDP data due on Friday, with markets looking for the economy to grow by 0.3% QoQ in the fourth quarter, unchanged from the previous reading. On an annual basis, GDP is expected to rise by 1.3% YoY, easing slightly from 1.4% previously.

Earlier on Thursday, comments from European Central Bank policymakers offered a cautiously reassuring backdrop for the Euro. François Villeroy de Galhau said economic growth in the first quarter is expected to be consistent with an economy growing at around 1% on an annual basis in 2026. Meanwhile, Gabriel Makhlouf noted that inflation is basically on target at the moment, adding that the ECB is in a good place on policy.

Meanwhile, the ECB is widely expected to keep policy on hold for an extended period. A Reuters poll conducted between February 9-12 showed that 66 out of 74 economists expect the central bank to hold its deposit rate at 2.00% through 2026, and no change is expected before 2027.

ECB FAQs

What is the ECB and how does it influence the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

What is Quantitative Easing (QE) and how does it affect the Euro?

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

What is Quantitative tightening (QT) and how does it affect the Euro?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

Author

Vishal Chaturvedi

FXStreet

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

GBP/USD flies to two-week highs, targets 1.3400

GBP/USD trades well above the 1.3300 barrier on Thursday as the Greenback comes under renewed selling pressure following a softer-than-expected US NFP report in June. Meanwhile, Cable extends its multi-day recovery and looks to challenge 1.3400 sooner rather than later.

EUR/USD: Signs of life emerge above 1.1400

EUR/USD leaves behind two daily pullbacks in a row and advances to multi-day peaks near 1.1470 on Thursday, partially offsetting the sharp decline in place since June. The pair’s decline follows the intense retracement in the US Dollar, which is particularly sponsored by disheartening prints from June’s Payrolls and the sharp sell-off in USD/JPY. The US markets will be closed on Friday due to the Independence Day holiday.

Gold hits six-day tops past $4,100

Gold extends its bullish momentum on Thursday, climbing above the $4,100 mark per troy ounce to reach its highest level in a week. The precious metal’s sharp rebound comes as the US Dollar retreats following disappointing US NFP data.

Strategy's STRC volatility points to late Bitcoin cycle reset — Bitwise

The recent volatility surrounding Strategy's perpetual preferred stock, STRC, could signal that Bitcoin (BTC) is approaching a cycle bottom, according to Bitwise CIO Matt Hougan. In a Wednesday report, Hougan argued that the sharp decline in STRC and Strategy's MSTR stock should be viewed as "classic end-of-cycle dynamics" rather than evidence of a broader structural threat to Bitcoin.

The market may no longer be giving the Magnificent Seven a free pass

For much of the past three years, investing has felt surprisingly simple. Whenever markets stumbled, investors knew where to look. Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta and Tesla repeatedly led Wall Street higher, shrugging off inflation fears, higher interest rates and geopolitical shocks.

Kevin Warsh offers no policy clues: Why markets still got their answer

Financial markets came to Sintra looking for clues about the Federal Reserve's (Fed) next move. They largely left with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.