GBP/USD + GBP/EUR Market Update

Post-NFP Consolidation as GBP/USD Holds Near 1.3349, EUR/USD Slips from Last Week's Highs; Late-July Central Bank Cluster Dominates the Horizon, Monday, 06 July 2026

GBP/USD: 1.3349 | GBP/EUR: 1.1682 | EUR/USD: 1.1427

Friday's sharply below-consensus US June payrolls print (57K against a 110K forecast, per the Bureau of Labor Statistics) delivered a significant jolt to dollar pricing, pushing GBP/USD to a two-week high of 1.3373 and EUR/USD back above 1.1450 before both pairs retraced modestly into the long weekend. UK political markets are also monitoring the likelihood of a cabinet reshuffle, with sterling unlikely to see major political impact until late July when Andy Burnham is set to become Prime Minister. With US markets returning to full liquidity today after Thursday's Independence Day closure, the focus shifts to positioning and the three-way central bank cluster in the final week of July.

Overnight & Market Tone:

GBP/USD opened this morning at 1.3350, with today's early range running from 1.3343 to 1.3357, a tight band consistent with a market in consolidation mode after last week's directional move. The pound held near $1.335, its highest in two weeks, with a 1% weekly gain as the dollar weakened on disappointing US jobs data; the US added just 57,000 jobs last month, far below forecasts, while unemployment fell to 4.2% as workers left the labour force. Brent crude has come well off its April highs, falling from above $110 to the low-$90s as the US-Iran ceasefire held, easing the energy risk premium that had been a dominant macro theme through May and June. Brent futures opened today at $71.90, a further leg lower that, if sustained, will ease near-term inflation expectations on both sides of the Atlantic. Risk sentiment is broadly constructive at the open, with the US-Iran ceasefire continuing to hold and equity futures pointing to a steady start for European bourses.

UK Data & Bank of England:

At its meeting ending on 17 June 2026, the MPC voted by a majority of 7-2 to maintain Bank Rate at 3.75%, with two members voting to increase Bank Rate by 0.25 percentage points to 4%. Chief economist Huw Pill and external member Megan Greene were the two dissenters, both voting for a hike. The Bank said, based on energy market pricing as of 15 June, that CPI inflation was expected to be "a little under 3% in 2026 Q3" and "a little over 3.25% in Q4", lower than its April forecasts as the ceasefire-driven oil price decline feeds through. UK CPI held at 2.8% in May, but services inflation rose to 3.7%, keeping the Bank of England cautious. The ONS confirms the unemployment rate at 4.9% for the February-April 2026 period, up 0.3 percentage points on the year, and the employment rate at 75.0%. The next Bank of England interest rate decision is 30 July 2026, alongside a new Monetary Policy Report. As of 2 July, financial markets expected the Bank to hold borrowing costs at 3.75% for the rest of the year, although the outlook remains highly uncertain. The 18 June 7-2 vote, one more hawkish dissent than April's 8-1, has set the tone going into 30 July; the US-Iran ceasefire has pulled energy prices down from their June spike, easing the near-term inflation picture, but services inflation at 3.7% keeps a hike on the table. The pound's gains last week were limited by the Bank of England's dovish stance; Governor Andrew Bailey highlighted a slowing UK economy and stated that the BoE would not rush to respond to rising oil prices, noting that inflation remains on track to reach 2%, though later than previously expected, while also ruling out near-term rate cuts. The UK data calendar is light today; the key domestic release this week is the June CPI print on Wednesday, which will directly inform MPC deliberations ahead of 30 July.

European Backdrop & EUR/USD:

The ECB Governing Council raised its three key interest rates by 25 basis points on 11 June, taking the deposit facility rate to 2.25%, the main refinancing rate to 2.40% and the marginal lending rate to 2.65%, effective 17 June 2026. The war in the Middle East was cited as generating inflation pressures, with the ECB's June staff projections forecasting headline inflation averaging 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028. The baseline sees eurozone economic growth at just 0.8% in 2026, a downward revision reflecting a more pronounced impact of the war on commodity markets, real incomes and confidence. The June hike was the ECB's first since 2023, and the Governing Council has been explicit that it is not pre-committing to a particular rate path. The euro took a hit on Wednesday after the Eurozone's latest CPI showed headline inflation cooling more than forecast, easing from 3.2% in May to 2.8% in June versus expectations for 3.0%; core inflation also surprised markets by slowing from 2.6% to 2.4%, rather than holding steady. That disinflation print materially shifted the debate around the 23 July ECB meeting. GBP/EUR climbed to its highest level in a year on Wednesday after the softer-than-expected Eurozone inflation data prompted investors to scale back expectations for further ECB policy tightening, touching a one-year high of 1.1634. Markets now price roughly a 50% chance of a further ECB hike in September, down from near-certainty before the June CPI release. For EUR/USD specifically, the pair sits at 1.1427 this morning, having pulled back from last week's post-NFP high near 1.1456. The US dollar firmed sharply after the Federal Reserve held rates at 3.50%-3.75% on 17 June and signalled possible hikes, with US inflation at 4.2%; that pressed EUR/USD lower even though the euro's own story turned more hawkish. The pair is caught between two competing forces: a softer Eurozone inflation print that reduces the probability of an ECB follow-up hike in July, and a weaker dollar narrative following the NFP miss. The euro's 2026 range against the dollar has already run from 1.1435 to 1.2019, and at 1.1427 the pair is pressing the lower end of that band. Treasurers with direct EUR/USD exposures should note that the pair is sensitive to any shift in ECB guidance at the 23 July meeting; a hold with dovish language would likely push EUR/USD back toward 1.1350-1.1380, while a hike or hawkish hold would target the 1.1500-1.1520 area.

US Backdrop:

The Federal Reserve left rates unchanged in Kevin Warsh's first meeting as chair, but a hawkish policy statement and economic projections raised the odds of a rate hike this year; the FOMC held the target range at 3.50%-3.75% and adopted a hawkish tone, noting its commitment to bringing down inflation. Based on 18 of 19 possible responses, the median estimate for the fed funds rate at end-2026 is now 3.8%, up from 3.4% in the prior March projections, signalling the committee sees at least one rate hike as necessary this year. The next FOMC meeting is scheduled for 28 and 29 July, with the decision on the second day, and no Summary of Economic Projections will be produced. The June payrolls miss (57K) has complicated the case for a near-term hike, and markets will scrutinise any Fed speaker commentary this week for signals on whether the weak labour market data shifts the dot-plot calculus ahead of 29 July.

Technical Picture:

GBP/USD: Resistance at 1.3373 (Friday's post-NFP high), then 1.3420 and 1.3500. Support at 1.3300, then 1.3245 (1 July low) and 1.3161 (late-June trough).
GBP/EUR: Resistance at 1.1700 (round number) and 1.1734 (recent one-year high). Support at 1.1620, then 1.1535 and 1.1480.
EUR/USD: Resistance at 1.1456 (Friday's post-NFP high), then 1.1500 and 1.1520. Support at 1.1400 (psychological), then 1.1380 and 1.1350.
Outlook: GBP/USD and EUR/USD are both consolidating below last week's highs in a manner consistent with a market awaiting fresh catalysts; the 1.3300 and 1.1400 levels respectively represent the near-term floors, and a break below either would signal a reassertion of dollar strength ahead of the July FOMC.

Today's Calendar:

Wednesday's UK June CPI print is the week's pivotal domestic release; a reading at or below the 2.6% consensus would further reduce the probability of a BoE hike on 30 July and would likely weigh on GBP/USD, while a sticky or upside surprise would reinforce the hawkish minority on the MPC and support sterling.

Outlook:

The three pairs are likely to trade in a consolidation range today, with GBP/USD anchored between 1.3300 and 1.3373, GBP/EUR between 1.1620 and 1.1700, and EUR/USD between 1.1380 and 1.1456, as the market awaits Wednesday's UK CPI and FOMC minutes for directional cues. The dominant risk scenario for the remainder of July is a hawkish surprise from any one of the three central banks at their late-July meetings, which would sharply reprice the relevant currency pair; treasurers with material USD payables or EUR receivables due in late July should consider whether current levels warrant forward cover ahead of that three-way event risk.

This commentary is provided for informational purposes only and should not be construed as investment, legal, or tax advice. Past performance is not indicative of future results. Please consult with qualified professionals before making any financial decisions. Vantry Capital Ltd is authorised and regulated by the Financial Conduct Authority.