GBP/USD + GBP/EUR Market Update

GBP/USD Extends Post-NFP Gains to 1.3379 as Brent Slides Below $72; EUR/USD Holds 1.1426 on ECB Hold Expectations Ahead of the Late-July Central Bank Cluster, Tuesday, 07 July 2026

GBP/USD: 1.3379 | GBP/EUR: 1.1709 | EUR/USD: 1.1426

Sterling has continued to benefit from the broad dollar retreat that followed the 57K June non-farm payrolls miss, with GBP/USD touching 1.3392 in early London trade before settling back to 1.3379 (Bloomberg, 07 July). Brent crude fell to $72.07/bbl on Monday, down over 23% in the past month, removing a key inflation risk premium from the market and softening the case for near-term rate hikes across all three central banks. The primary focus today is whether the dollar can stabilise ahead of Wednesday's US FOMC minutes and Thursday's US CPI print, both of which carry the potential to reprice Fed expectations sharply.

Overnight & Market Tone:

GBP/USD traded a tight 1.3350-1.3392 range overnight, consistent with the consolidation theme that has prevailed since Friday's NFP-driven spike. GBP/EUR touched 1.1710 in early European trade, with the previous close at 1.1704, reflecting modest sterling outperformance as the euro remains capped by the softening inflation narrative. EUR/USD is steady near 1.1426, essentially unchanged from Monday's close. The FTSE 100 is indicated around 10,651, with Brent crude near $68.96/bbl and the US 10-year Treasury yield at approximately 4.47%. Risk sentiment is broadly constructive: Brent is hovering near its lowest levels since late February as maritime flows through the Strait of Hormuz steadily recover, and OPEC+ has approved a quota increase of 188,000 barrels per day for next month, continuing to unwind the energy risk premium that drove so much of the first-half volatility.

UK Data & Bank of England:

There are no tier-one UK data releases today. The most recent domestic data of note remains the May CPI print: CPI inflation was 2.8% in May 2026, above the MPC's 2% target, with services inflation at 3.7%, keeping the MPC cautious. The next significant UK data point ahead of the 30 July MPC decision will be the June CPI release (due 16 July) and the May GDP print (due 11 July). GDP is estimated to have grown by 0.7% in the three months to April 2026, though output fell 0.1% in April itself compared with March, suggesting momentum is softening at the margin. On the policy front, the MPC voted 7-2 to hold Bank Rate at 3.75% at its June meeting, with two members voting to raise to 4.00%. Chief economist Huw Pill and external member Megan Greene were the two dissenters in favour of a hike. As of 2 July, financial markets expected the Bank to hold borrowing costs at 3.75% for the rest of the year, though the outlook remains highly uncertain. A Reuters poll showed most economists expect a hold for the rest of the year, with nearly 40% pricing at least one hike. The 30 July meeting is accompanied by a new Monetary Policy Report and Governor Bailey's press conference, making the vote split and the updated projections potentially more market-moving than the rate decision itself. Governor Bailey has highlighted a slowing UK economy and stated 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 ruling out near-term rate cuts. Sterling's near-term bias therefore rests on whether the June CPI print (due 16 July) validates or challenges the two hawkish dissenters.

European Backdrop & EUR/USD:

The dominant development for the euro this week is the June Eurostat HICP flash estimate, published on 1 July. Euro area annual inflation is expected to be 2.8% in June 2026, down from 3.2% in May, according to the Eurostat flash estimate. Energy inflation eased to 8.7% from 10.8% in May, services inflation fell to 3.2% from 3.5%, and food, alcohol and tobacco inflation declined to 1.6% from 1.9%. The print came in well below the 3.0% consensus and marks the lowest reading since February, before the Iran war disrupted energy markets. The slowdown was broad-based across the three largest eurozone economies, reinforcing expectations that the ECB would not raise rates again at its July meeting, after having hiked last month for the first time since 2023. ECB President Lagarde has defended the June rate increase, arguing that underlying inflation remains too persistent to declare victory, but the softer June data has strengthened the case for a hold at the 23 July meeting. The ECB's own June projections foresaw headline inflation averaging 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028, with core inflation at 2.5% for both 2026 and 2027; the June HICP undershoot is now tracking below that baseline, which reduces the urgency for a second consecutive hike. Markets had previously priced at least one more ECB rate hike this year, but the combination of falling energy prices, a softer June HICP, and ECB growth projections of just 0.8% for 2026 are shifting the balance toward a prolonged pause. For EUR/USD specifically, the pair is holding 1.1420-1.1440 in a narrow range. The euro's inability to sustain a move above 1.1460 (the post-NFP high from 3 July) reflects the competing forces at work: a softer dollar following the payrolls miss is supportive, but reduced ECB hike expectations cap the upside. The Dollar Index broke above 100 after the Fed's hawkish June meeting, and EUR/USD fell despite the ECB's own rate hike, because the dollar's pull outweighed it. That dynamic is now partially reversing as the dollar softens, but the pair lacks a strong directional catalyst until the ECB decision on 23 July. Treasurers with direct EUR/USD exposures should note that the pair has traded a 1.1400-1.1460 range since the NFP print and that a break of either boundary is likely to require a fresh macro catalyst, most plausibly Thursday's US CPI.

US Backdrop:

The FOMC voted unanimously to keep its benchmark overnight borrowing rate anchored in a range of 3.5%-3.75% at the June meeting. The dot plot showed nine members projecting at least one hike in 2026, while eight projected rates unchanged, with one dot still projecting a cut. Markets are currently pricing approximately a 73% chance of the Fed keeping rates steady at its 29 July meeting, and roughly a 65% chance of at least a quarter-point hike at the September meeting, according to the CME FedWatch tool. Chair Warsh has signalled the Fed will no longer provide traditional forward guidance, and declined to comment on the outlook for the upcoming meeting, saying decisions will be based on incoming data. The key US events this week are the FOMC minutes (Wednesday) and June CPI (Thursday), both of which could reprice the September hike probability and drive significant USD moves.

Technical Picture:

GBP/USD: Resistance at 1.3392 (today's early high / Bloomberg), then 1.3430 and 1.3500. Support at 1.3349 (Monday's close), 1.3300, and 1.3161 (late-June trough).
GBP/EUR: Resistance at 1.1710 (early London high today), then 1.1730 and 1.1760. Support at 1.1680 (Monday's range low), 1.1640, and 1.1600.
EUR/USD: Resistance at 1.1460 (post-NFP high, 3 July), then 1.1500 and 1.1530. Support at 1.1400, 1.1370, and 1.1300.
Outlook: All three pairs are in consolidation mode within their post-NFP ranges; a break higher in GBP/USD and EUR/USD requires either a further deterioration in US data expectations or a fresh hawkish BoE or ECB signal, while the key downside risk is a hot US CPI print on Thursday that revives September hike pricing and restores dollar strength across the board.

Today's Calendar:

Today's calendar is light on tier-one data; the primary market driver is likely to be any Fed speaker commentary on the September rate path, which could reprice USD ahead of Thursday's pivotal US CPI release.

Outlook:

The post-NFP dollar softness has carried GBP/USD to its best level since early June and stabilised EUR/USD above 1.1400, but both pairs are likely to remain range-bound until Thursday's US CPI print provides a clearer steer on whether the Fed's September hike probability rises or falls; a hot print (consensus circa +0.3% MoM core) would likely reverse the week's gains sharply, while a soft reading could push GBP/USD toward 1.3450 and EUR/USD toward 1.1500. Treasurers with USD payables who have not yet acted should weigh the risk of a CPI-driven reversal against the opportunity presented by current levels, which remain approximately 170 pips above the late-June trough; those with EUR exposures face a narrower range but should note that the 23 July ECB decision is the next significant binary event for EUR/USD.

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.