The Euro (EUR) has weakened significantly against the British Pound (GBP), trading near eight-month lows at 0.8610, following monetary policy decisions by the European Central Bank (ECB) and the Bank of England (BoE), both of which left interest rates unchanged as expected. This move comes amid ongoing geopolitical tensions related to the US-Iran conflict, which both central banks cited as a reason for caution regarding inflation and economic growth [1]. ECB President Christine Lagarde and Bundesbank President Joachim Nagel signaled a hawkish stance, hinting at a possible rate hike in the coming months, while BoE Governor Andrew Bailey was more ambiguous about future tightening. Despite the ECB's tough rhetoric, the market reacted by selling the Euro against the Pound, resulting in a 0.35% weekly loss for EUR/GBP and a nearly 1.2% decline over the past four weeks [1].
Technical indicators for EUR/GBP show a bearish bias remains intact, with the 4-hour Relative Strength Index (RSI) in the low 30s after reaching oversold levels, suggesting a potential bullish correction. The Average Convergence Divergence (MACD) remains negative, indicating that any rallies are likely to be sold into for now. Upside resistance is seen at 0.8655, 0.8685, and 0.8700, while key support is at 0.8610, with further support at 0.8595 and above 0.8500 [1].
In broader Euro movements, the currency was the strongest against the New Zealand Dollar, up 0.30%, but down 0.07% against GBP and 0.10% against USD on the day [1]. According to ING's Chris Turner, recent ECB communication had limited impact on Euro rates, with markets still pricing a June rate hike near 90%. Turner notes that oil volatility, driven by Gulf tensions, was the primary factor influencing EUR swaps, and expects EUR/USD to remain in a 1.1650–1.1750 range until there is more clarity on the Middle East situation [2].
Meanwhile, the Canadian Dollar (CAD) has held firm on elevated oil prices, with USD/CAD trading around 1.3575–1.3570, its lowest since March 11. Persistent geopolitical uncertainties, including the closure of the Strait of Hormuz and stalled US-Iran peace talks, have kept oil prices elevated, fueling inflation concerns and supporting bets that the US Federal Reserve may keep rates unchanged well into next year. This dynamic has favored USD bulls and supported dip-buying in USD/CAD, though the pair is on track for its fourth consecutive weekly loss [3].
CONCLUSION
The Euro's decline against the Pound and muted reaction to ECB communication reflect ongoing market caution amid geopolitical uncertainty and central bank indecision. Oil-driven volatility continues to shape currency movements, with the Euro and Canadian Dollar both influenced by developments in the Middle East. Market participants remain focused on upcoming economic data and geopolitical events, which are likely to drive further volatility and trading opportunities.