European currencies are trading without a clear direction against the US dollar, remaining in a consolidation phase following the earlier decline driven by USD strength. At the start of the week, both EUR/USD and GBP/USD attempted a recovery, but the upside proved limited, and the pairs are now testing the upper boundaries of their short-term trading ranges.

Market participants are adopting a wait-and-see approach ahead of the release of key macroeconomic data, which could determine the next direction for the dollar and major currency pairs. Geopolitical uncertainty in the Middle East remains an additional factor weighing on sentiment. Reports of ongoing tensions and risks to energy supply disruptions continue to support elevated oil prices, fuelling inflation expectations and prompting investors to reassess the outlook for central bank policy.

Today, the focus is on business activity and inflation data from Europe and the UK, as well as housing market and consumer activity figures from the US. These releases could significantly impact interest rate expectations, prompting traders to refrain from opening large positions ahead of the data.

EUR/USD

At the start of the week, EUR/USD tested key support near 1.1480 before rebounding above 1.1600. Technical analysis suggests a range-bound market: a rejection from the key resistance level at 1.1640 could lead to a renewed test of recent lows in the 1.1420–1.1480 area. Conversely, a firm break above 1.1640 and a move out of the range could open the way for further gains towards 1.1680–1.1710.

Key events for EUR/USD:

• Today at 11:00 (GMT+2): Germany business expectations index
• Today at 13:00 (GMT+2): Bundesbank monthly report
• Today at 14:30 (GMT+2): US current account balance

GBP/USD

GBP/USD is also trading within a range. Following last week’s Bank of England meeting, the pair strengthened towards 1.3480 but failed to sustain upward momentum, retreating to 1.3250 on Monday. Technical analysis points to the potential for a retest of the recent high; however, in the event of weak UK data, a move lower towards the 1.3350–1.3250 area is equally possible.

Key events for GBP/USD:

• Today at 09:00 (GMT+2): UK Consumer Price Index (CPI)
• Today at 11:30 (GMT+2): UK house price index
• Tomorrow at 11:30 (GMT+2): Speech by Bank of England Financial Policy Committee member Sarah Breeden

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