EUR/GBP traded near 0.8740 during Asian hours on Monday, after bouncing back from losses in the previous session. Germany’s IFO Business Climate survey for February is due later today.
The pair was little changed. Both the euro and the pound rose against the US dollar after the US Supreme Court ruled that tariffs imposed under the IEEPA were unlawful without Congressional approval. Donald Trump later signalled plans for a new 15% global tariff under other trade laws. US officials also said they would look for alternative legal grounds to keep existing tariffs in place.
Trade Policy Uncertainty In Focus
In Europe, the European Parliament’s trade chief said the EU would propose pausing ratification of its trade agreement with the US until it gets clearer guidance on US trade strategy, according to Bloomberg. This added to uncertainty around trade policy.
UK data supported the pound. January Retail Sales rose 4.5% year-on-year versus forecasts of 2.8%. February S&P Flash PMI data also showed growth in both services and manufacturing.
However, softer UK labour market data has raised expectations for further Bank of England easing after the unemployment rate increased in Q4 2025. Markets now price a 75% to 80% chance of a 25-basis-point rate cut at the March meeting.
We expect EUR/GBP to stay in a tight range because the forces driving both currencies are mixed. The pound is getting help from strong recent data, but that support is limited by the strong expectation of a BoE rate cut next month. This clash between good current data and easier future policy is keeping traders cautious.
Strategy Ideas For The March Boe Meeting
On the pound, January retail sales jumped 4.5% year-on-year, and the February flash PMIs showed growing activity. Even so, markets are focused on the Bank of England, especially after unemployment rose to 4.2% in Q4 2025. With money markets pricing close to an 80% chance of a March rate cut, any GBP strength may not last.
On the euro side, the main issue is trade policy uncertainty with the United States. The German IFO Business Climate survey will be an important signal for confidence in the Eurozone’s largest economy. A reading below the recent 85.5 level could weigh on the euro. The EU’s position on pausing ratification of the US trade deal adds another risk that could limit euro gains.
With uncertainty high and a major BoE event in March, we see buying volatility as a sensible approach. Traders could consider EUR/GBP straddles or strangles that expire after the March policy meeting. This can pay off if the pair moves sharply in either direction, whether the BoE cuts as expected or surprises the market.
For traders with a directional view, the likely BoE cut points to higher EUR/GBP if the pound weakens. A lower-risk way to express this view is to buy call options on the pair. This lets traders benefit from a weaker pound while limiting losses to the premium paid if strong UK data leads the BoE to hold rates.
US trade policy shifts are also affecting capital flows. The proposed 15% global tariff has weakened the US dollar, helping both the euro and the pound. That could keep EUR/GBP choppy, since both currencies may rise together against the dollar. This supports volatility-based strategies over simple one-way trades.
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