EUR/GBP steady as Eurozone inflation eases, UK data in focus

Finance

EUR/GBP steady as Eurozone inflation eases, UK data in focus

EUR/GBP trades around 0.8670 on Monday at the time of writing, virtually unchanged on the day, in a context of relative stability of the Euro (EUR) against the Pound Sterling (GBP).

On the Eurozone side, the latest inflation data confirm a gradual disinflation trend. The Harmonized Index of Consumer Prices (HICP) was revised down to 1.9% YoY in December from 2.0% in the initial estimate, easing from 2.1% in November and coming in below market expectations. Core HICP, excluding volatile components, was confirmed at 2.3% YoY, after 2.4% previously, signaling a continued slowdown in underlying price pressures.

This environment supports the cautious approach of the European Central Bank (ECB). The central bank continues to favor a data-dependent, meeting-by-meeting approach, without committing to a specific rate path, helping to stabilize the Euro.

On the geopolitical side, rising frictions between the European Union (EU) and the United States (US) are adding to market uncertainty. European officials have signaled their readiness to retaliate if the tariff measures announced by US President Donald Trump are implemented. At the same time, European Union ambassadors have agreed to intensify diplomatic efforts aimed at discouraging Washington, while quietly preparing potential countermeasures.

On the contrary, UK Prime Minister Keir Starmer said that “tariffs are not the right way forward and should not be used against allies”, adding that the United Kingdom (UK) believes in partnership and will keep dialogue open. Despite these comments, Pound Sterling (GBP) is expected to remain volatile ahead of a data-heavy week in the UK.

Investors are now turning their attention to key UK releases, starting with labor market figures for the three months to November, due on Tuesday. The ILO Unemployment Rate is expected to edge down to 5% from 5.1%, while Average Earnings Including Bonuses are seen easing to 4.6% from 4.7%. The UK Consumer Price Index (CPI) and Retail Sales figures for December, along with the preliminary S&P Global Purchasing Managers Index (PMI) data for January, will also be closely watched for fresh clues on the monetary policy outlook of the Bank of England (BoE).

Against this backdrop, EUR/GBP price action is likely to remain driven by the balance between a Eurozone benefiting from well-anchored inflation and a United Kingdom facing persistent macroeconomic and monetary uncertainties.