The euro advanced against the British pound on Monday, nearing the 0.8700 level as improving global risk sentiment and diverging economic signals from the eurozone and the UK influenced currency flows. The move reflects shifting investor preferences amid a calmer market environment and mixed monetary policy expectations.
EUR/GBP traded around 0.8690, extending gains from last week, as traders responded to stronger eurozone data and easing fears of a broader economic slowdown. Meanwhile, the pound showed limited momentum following dovish signals from the Bank of England and weaker-than-expected UK GDP figures, which cast doubt on the strength of the country’s recovery.
Improved sentiment in equity markets and stable bond yields also contributed to a risk-on environment, lifting the euro and other major currencies perceived as relatively stable. Investors are becoming more comfortable with the idea that central banks, particularly the European Central Bank, may maintain current rate levels longer than previously anticipated.
The euro’s gains were also supported by comments from ECB officials, who signaled continued vigilance on inflation and expressed caution around the timing of any rate cuts. By contrast, the BoE faces mounting pressure to ease policy sooner due to signs of economic softness and ongoing consumer strain.
While geopolitical tensions and inflationary risks remain, market volatility has eased, allowing currency pairs like EUR/GBP to respond more clearly to fundamental data and central bank cues. Analysts suggest the pair could test 0.8700 in the near term if sentiment holds and incoming data from the UK continues to underperform.
With both economies at a policy crossroads, traders will be watching closely for forward guidance from the ECB and BoE this week. For now, the euro’s slight edge over the pound reflects relative confidence in the bloc’s economic trajectory and a steadier inflation outlook.
