The EUR/GBP currency pair traded in a narrow range on Friday, fluctuating between minor gains and losses, with the cross hovering around 0.8671 at the time of writing. This marks a broadly flat performance for the day and positions the pair for a third consecutive weekly decline [1]. The British Pound found support from stronger-than-expected UK Retail Sales data for March, which showed a 0.7% month-on-month increase, surpassing expectations of 0.2% and reversing the previous 0.6% decline. On a year-on-year basis, retail sales rose by 1.7%, slightly easing from 1.8% previously but still above the forecast of 1.3% [1].
In contrast, the Euro remained under pressure following the release of Germany’s IFO Business Climate Index for April, which fell to 84.4 from 86.3, missing expectations of 85.5. The Current Assessment gauge declined to 85.4 from 86.7, below the 86.2 forecast, while the Expectations Index dropped to 83.3 from 85.9, also coming in under estimates of 85. These figures highlight deteriorating business sentiment in Germany amid rising energy prices and ongoing Middle East tensions [1].
Geopolitical developments also influenced market sentiment, with some improvement noted after reports that Iran’s Foreign Minister Abbas Araghchi is expected in Islamabad, raising hopes for renewed diplomatic engagement. However, Iran’s state news agency IRNA clarified that the visit is intended for discussions with Pakistani officials rather than direct talks with the US. Uncertainty persists regarding the possibility of direct US-Iran negotiations, as the ongoing US naval blockade—viewed by Tehran as a major obstacle—continues, keeping risks of oil supply disruptions elevated and energy prices high. This situation is fueling inflation concerns and complicating the monetary policy outlook for both the Bank of England (BoE) and the European Central Bank (ECB) [1].
Looking ahead, market attention is focused on the upcoming policy meetings of the BoE and ECB, where both central banks are widely expected to keep interest rates unchanged. The market will be closely watching for forward guidance, particularly regarding policymakers’ assessments of the impact of elevated energy prices and any signals on the future interest rate path, as traders increasingly price in potential rate hikes [1].
CONCLUSION
The EUR/GBP pair remains range-bound as robust UK retail sales data supports the Pound, while weak German business sentiment weighs on the Euro. Elevated energy prices and geopolitical risks continue to cloud the outlook, with markets awaiting guidance from the BoE and ECB meetings next week. The overall market sentiment is cautious, with traders seeking clarity on future monetary policy moves.