- EUR/GBP softens to near 0.8325 in Friday’s early European session.
- UK economy grew by 0.1% QoQ in Q4, beating expectations after recording zero growth in the previous reading.
- Investors await the preliminary reading of the Eurozone Q4 GDP report, which is due later on Friday.
The EUR/GBP cross trades in negative territory for the second consecutive day around 0.8325 during the early European session on Friday. The upbeat UK Gross Domestic Product (GDP) data for the fourth quarter (Q4) provides some support to the Pound Sterling (GBP).
The UK GDP expanded by 0.1% between October and December, surpassing forecasts of a 0.1% decline, the Office for National Statistics (ONS) showed on Thursday. In December alone, GDP rose by 0.4% MoM, compared to 0.1% expansion in November.
BoE officials have been guiding a cautious approach to interest rate cuts as they are concerned about the persistence of inflationary pressure. BoE Chief Economist Huw Pill said on Thursday that he “urges caution on interest rate cuts” because the long process of wrestling down inflation is not yet complete.
On the Euro front, the potential trade war between Europe and the US could drag the shared currency lower. US President Donald Trump unveiled a roadmap on Thursday for charging reciprocal tariffs against every country that imposes duties on US imports. Nonetheless, commerce and economics officials need to study reciprocal tariffs against countries that place tariffs on US goods, and it will not be due until April 1.
Later on Friday, the preliminary reading of the Eurozone GDP for Q4 will be published. The Eurozone economy is estimated to grow 0.9% YoY in Q4. In case of a stronger-than-expected outcome, this could lift the Euro (EUR) against the GBP in the near term.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD gains ground above 0.6300 ahead of Chinese data
The AUD/USD pair gathers strength to near 0.6325 during the early Asian session on Monday. The uptick of the pair is bolstered by the weaker US Dollar and special plans from the Chinese government to boost consumption and raise incomes.
USD/JPY remains below 149.00; focus shifts to BoJ/Fed meetings this week
USD/JPY kicks off the new week on a weaker note amid the prevalent bearish sentiment surrounding the USD and the divergent Fed-BoJ policy expectations. However, a positive risk tone could undermine the JPY and limit losses.
Gold holds positive ground near $3,000 on safe-haven demand
Gold price remains strong near $2,985 after retracing from an all-time high of $3,005 during the early Asian session on Monday. The softer US Dollar and economic uncertainty over the impact of a global trade war provide some support to the precious metal.
Week ahead: Central banks in focus amid trade war turmoil
Fed decides on policy amid recession fears.Yen traders lock gaze on BoJ for hike signals. SNB seen cutting interest rates by another 25bps. BoE to stand pat after February’s dovish cut.
Week ahead – Central banks in focus amid trade war turmoil
Fed decides on policy amid recession fears. Yen traders lock gaze on BoJ for hike signals. SNB seen cutting interest rates by another 25bps. BoE to stand pat after February’s dovish cut.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.