EUR/GBP dropped below 0.8700 on Monday after failing near 0.8720. It then moved toward 0.8685, the low end of last week’s range. The wider downtrend channel still has resistance near 0.8720.
The pair fell 0.3% on Friday, even after the Eurozone GDP second estimate was revised higher. Eurozone Industrial Production data due Monday is expected to show a 1.5% drop in December, after a 0.7% rise in November.
Key Drivers And Near Term Focus
The UK economic calendar is empty on Monday. Focus shifts to Tuesday’s UK jobs report, which could change expectations for the Bank of England’s next move.
On the daily chart, EUR/GBP traded near 0.8695 after failing at trendline resistance. The bounce from early February lows is losing steam. MACD shows a smaller positive histogram, while RSI is slightly above 50.
The pair has fallen for four days in a row and is holding just above support at 0.8675, the 6 February low. A break below that level could expose 0.8612, the 4 February low.
At this point in 2025, EUR/GBP also struggled below 0.8700 as bearish momentum grew. Worries about weak Eurozone industrial data weighed on the Euro. This helped form a clear downtrend channel that traders tracked closely.
Shifting Macro Backdrop
In February 2026, the Eurozone picture looks different. Recent Eurostat flash estimates show core inflation remains sticky at about 2.9% last month. That makes it harder for the European Central Bank to hint at rate cuts. This is a change from last year’s weak factory output story and gives the Euro some support.
In the UK, the focus has turned to a cooling economy. Wage growth slowed to 5.6% in the latest ONS report, down from above 7% in mid-2025. UK inflation also fell faster than expected to 3.4% in January 2026. Together, this raises the chance that the Bank of England cuts rates before the ECB. This shift in policy expectations is a big change from last year.
With fundamentals changing, traders may consider positioning for a break away from the old downtrend. One approach is buying EUR/GBP call options with a strike near 0.8750, expiring in six to eight weeks. This offers limited risk while targeting a move higher if the data keeps diverging.
To limit the risk if this view is wrong, traders could add a hedge for a deeper drop. Buying out-of-the-money put options, such as a 0.8600 strike, can help set a floor if UK data beats expectations or sentiment turns quickly. This keeps downside risk more contained while still allowing for upside exposure.
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