Pound Weakens After Soft UK Inflation Data as Euro Awaits Fresh Market Signals

The pound remains under pressure following the release of weaker-than-expected UK inflation data. The slowdown in inflation has strengthened expectations that the Bank of England could adopt a more accommodative policy stance in the coming months, weighing on sterling. Meanwhile, the euro continues to trade within a relatively narrow range as investors await fresh signals from the eurozone economy.

Market participants also remain cautious due to the ongoing escalation of tensions in the Middle East. The United States continues to carry out strikes on targets in Iran, supporting demand for traditional refuge assets, including the US dollar, and limiting the recovery potential of European currencies.

Attention in the coming days will focus on the preliminary Purchasing Managers' Index (PMI) releases from Germany, France, the United Kingdom, and the eurozone, which will provide an early assessment of economic conditions at the start of the third quarter. The data are particularly important for the euro, as they could influence expectations for the European Central Bank's next policy moves. Stronger-than-expected figures may support the single currency, while weaker readings could reinforce expectations of further ECB policy easing. In addition, the weekly US initial jobless claims report will provide another update on the health of the US labour market.

EUR/USD

EUR/USD has entered a consolidation phase after failing to test the key resistance level at 1.1500. Technical analysis suggests the pair could decline towards the 1.1330–1.1370 area, as a bearish harami pattern has formed on the daily timeframe. A renewed upward correction may become more likely only after a decisive break and close above 1.1500.

Key events for EUR/USD:

• Today at 09:45 (GMT+3): France Flash PMI
• Today at 10:20 (GMT+3): Speech by Bundesbank Executive Board member Sabine Mauderer
• Tomorrow at 10:00 (GMT+3): Germany GfK Consumer Climate Index

GBP/USD

GBP/USD is undergoing a bearish pullback after buyers failed to establish a foothold above 1.3500. A bearish harami pattern has also formed on the daily chart, increasing the likelihood of another test of the nearby support zone at 1.3320–1.3340. The bearish scenario would only be invalidated by a decisive close above 1.3400.

Key events for GBP/USD:

• Today at 13:00 (GMT+3): UK CBI Industrial Trends Orders
• Today at 15:30 (GMT+3): US Initial Jobless Claims
• Tomorrow at 11:30 (GMT+3): UK Flash Manufacturing PMI

Summary

Sterling remains under pressure following softer UK inflation data, while the euro continues to consolidate as traders await fresh economic signals from the eurozone. Over the coming days, the preliminary PMI releases are likely to be the main catalysts for European currencies, as they could reshape expectations for future policy decisions by both the European Central Bank and the Bank of England. US macroeconomic data and developments in the Middle East are also expected to remain important drivers of market sentiment.

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