Correction Ends: European Currencies Lose Ground

The euro and the pound resumed their decline after a brief recovery, remaining under pressure from both fundamental and political factors. Market participants noted rising uncertainty amid ongoing debates in the United States over the extended government shutdown and persistent geopolitical tensions. These developments continue to support demand for the US dollar and limit any meaningful rebound in European currencies.

Investors’ attention today will focus on macroeconomic releases from the United Kingdom and the euro area. From London, inflation data (CPI, PPI, RPI) will provide further insight into the Bank of England’s next policy steps. In the eurozone, trade balance figures and speeches by European Central Bank officials, including President Christine Lagarde, are expected to influence market expectations regarding the timing of future rate adjustments.

Later in the day, investors will also look to US data — weekly crude and gasoline inventories, along with mortgage lending statistics. While some of these indicators are of secondary importance, they could still affect short-term EUR/USD and GBP/USD movements, particularly amid elevated volatility and ongoing budget discussions in Washington.

EUR/USD

As anticipated, EUR/USD buyers tested the key 1.1700–1.1720 resistance zone last week. However, the pair failed to sustain gains, with a sharp reversal from these levels forming a Dark Cloud Cover candlestick pattern.
Technical analysis suggests that the pair could revisit its October lows near 1.1540. A renewed upward correction would only be likely after a firm break above 1.1700.

Key events for EUR/USD:

• 14:00 (GMT+3): Speech by ECB Vice-President Luis de Guindos
• 15:25 (GMT+3): Remarks from ECB President Christine Lagarde
• 20:00 (GMT+3): US 20-year Treasury bond auction

GBP/USD

The pair’s failure to hold above the 1.3440–1.3470 range allowed sellers to establish a reversal pattern and push prices below 1.3400. Should this level continue to act as resistance, GBP/USD could extend its decline towards 1.3250–1.3300.

Key events for GBP/USD:

• 09:00 (GMT+3): UK Consumer Price Index (CPI)
• 14:00 (GMT+3): US MBA Mortgage Applications
• 23:30 (GMT+3): Speech by Bank of England Deputy Governor Sam Woods

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