EUR/GBP Forecast 26/1:Euro Drops Hard After UK Retail Sales

2026-01-26 02:11:23

(MENAFN- Daily Forex) The Euro has been extraordinarily negative against the British pound on Friday, as the economic figures in the United Kingdom continue to impress, suggesting a hesitant Bank of England/GBP

The Euro has been extraordinarily negative against the British pound during the trading session on Friday, knocking back some of the previous Euro strength as the retail sales in the United Kingdom came out much hotter than anticipated, along with the manufacturing PMI forward-looking numbers. So, it does look like inflation is going to stick around a bit in the United Kingdom, and that keeps the Bank of England perhaps thinking about keeping rates higher for longer.

It is a very similar situation to what we see at the Federal Reserve at the moment, although the Federal Reserve has become a little bit more cautious as of late. But for three years now, I have been hearing about the Fed getting ready to cut drastically, and it is yet to happen. Maybe the United Kingdom is in the same position. The European Central Bank, of course, is where it needs to be, and it is going to stay flat. So, I think that is part of what is driving this.

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But when you look at the longer-term chart, we had just pulled back from a major resistance barrier going back multiple years. So now, the next thing I am watching is the 200-day EMA, currently sitting at the 0.8652 level. If we break down below there, then 0.86 is your next target, followed by 0.8450.

I do think it eventually does break down. It makes a lot of sense to me. That doesn't mean that it is easy, and it doesn't mean that it happens quickly. But quite frankly, I don't see why it won't. The central bank divergence and economic numbers alone should make that a real thing.

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