GBP/USD + GBP/EUR Market Update

Sterling Slips to 1.3190 as Burnham Fiscal Uncertainty Weighs; EUR/USD Pressured Near 1.1354 as Oil Slide Complicates ECB Path, Wednesday, 24 June 2026

GBP/USD: 1.3190 | GBP/EUR: 1.1617 | EUR/USD: 1.1354

GBP/USD was last quoted at 1.3195 in early Asian trade on 24 June, broadly consistent with our database level of 1.3190, having fallen to 1.3248 on 23 June, down 0.01% from the prior session. The pair's inability to sustain Tuesday's recovery above 1.3250 reflects the persistence of two headwinds: the post-FOMC hawkish dollar bid and a domestic political risk premium tied to the Burnham leadership transition. EUR/USD has drifted lower to 1.1354, with the pair caught between a still-hawkish ECB and a dollar that markets continue to price as the dominant force. Today's key watch is the flash S&P Global UK PMI for June at 09.30am, the first activity read since services contracted sharply in May.

Overnight & Market Tone:

Risk sentiment has softened modestly overnight, with the S&P 500 VIX edging higher toward 19.48 and the Dollar Index firming to 101.17, keeping pressure on both GBP/USD and EUR/USD. The FTSE 100 was indicated around 10,357 in recent data, with Brent crude futures trading in a range of $76.54 to $76.84 as the US-Iran peace process continues to drain the geopolitical risk premium from energy markets. The UK 10-year gilt yield was last quoted near 4.906%, still elevated relative to pre-conflict levels and reflecting the market's unresolved concern about the fiscal trajectory under a Burnham government. GBP/EUR has edged higher to 1.1617, a modest gain on the week, as EUR/USD's underperformance offsets some of sterling's own weakness.

UK Data & Bank of England:

UK CPI rose 2.8% in the 12 months to May 2026, unchanged from April and, critically, below market expectations of 3.0%. The headline softness, however, masks a more troubling detail for the MPC: services inflation rose to 3.7% from 3.2%, and services inflation is the figure the MPC watches most closely, because it tracks domestic, wage-driven pressure rather than imported energy costs. Core inflation was 2.6% in May, up from 2.5% in April. Against this backdrop, the MPC voted 7-2 at its 17 June meeting to maintain Bank Rate at 3.75%, with two members voting to increase Bank Rate by 0.25 percentage points to 4%. The Bank said CPI was expected to be "a little under 3% in 2026 Q3" and "a little over 3.25% in Q4," lower than its April forecasts. The next MPC decision is 30 July. As of 17 June, traders were pricing in one interest rate hike this year, though the outlook remains highly uncertain, with Pantheon Macroeconomics removing its forecast for a rate hike following the oil price decline, now expecting Bank Rate on hold through end-2027, while Deutsche Bank also sticks to a no-change call for this year. The political backdrop remains the dominant sterling driver: investors are focussed on the implications for the UK's fiscal outlook, with a key concern being the possibility of increased gilt issuance to finance higher public spending, which could further strain the UK's already fragile public finances. Today's flash June PMI at 09.30am is the first live data point since the UK Services PMI was revised up to 49.3 in May from a flash estimate of 47.9, signalling the first contraction since April 2025.

European Backdrop & EUR/USD:

The ECB raised its three key interest rates by 25 basis points at its 11 June meeting, with the decision described as robust across a range of scenarios mapping out how the Middle East shock might evolve. The deposit facility rate now stands at 2.25%, effective from 17 June 2026. The ECB's updated projections are sobering for growth: headline inflation is expected to average 3.0% in 2026 and 2.3% in 2027, while economic growth is projected at just 0.8% in 2026 and 1.2% in 2027, a stagflationary combination that limits the Governing Council's room to manoeuvre. Markets currently expect at least one more rate hike this year, though uncertainty lingers after data revealed the eurozone economy contracted in Q1 2026. The ECB's next meeting is 23 July. The Governing Council has maintained its data-dependent, meeting-by-meeting stance, standing ready to adjust all instruments within its mandate to ensure inflation stabilises at the 2% target in the medium term.

For EUR/USD, the pair's retreat to 1.1354 from last week's 1.1412 reflects a straightforward dynamic: the US dollar has firmed sharply, with the Dollar Index breaking above 100 after the Fed held rates and signalled possible hikes, pressing EUR/USD lower even though the euro's own story turned more hawkish. The continued slide in Brent crude toward $77 per barrel is a double-edged sword for the euro: it reduces the energy-driven inflation impulse that justified the ECB's June hike, potentially softening the case for a July follow-through, while simultaneously removing a key support for eurozone terms of trade. The EU's terms of trade have deteriorated sharply following the Iran conflict, while relative equity returns have collapsed; J.P. Morgan Research sees EUR/USD hovering between 1.13 and 1.15 in the next three quarters. For treasurers with direct EUR/USD exposures, the pair is now trading toward the lower end of its 2026 range, with the 1.13 area representing the next meaningful support if the dollar bid extends. A surprise hawkish signal from any ECB speaker ahead of the 23 July meeting, or a softer-than-expected US PCE print, would be the most likely catalysts for a recovery toward 1.15.

US Backdrop:

The Federal Reserve held its benchmark rate at 3.50%-3.75% on 17 June, but the projections underneath told a more hawkish story: the median policymaker now expects rates to end 2026 higher than today, a flip from March when the median still implied a cut, and 17 of 18 officials judged the risks to inflation to be tilted to the upside. In Chair Warsh's first meeting, the Fed's statement was revamped to be dramatically shorter and to remove key language indicating a bias toward future cuts; Warsh did not share his views in the dot plot and said he would form task forces to overhaul major Fed operations. US CPI was up 4.2% year-on-year in May, primarily driven by rising energy, oil and gas prices. The next FOMC decision is 29 July; today's US calendar includes weekly jobless claims and the final Q1 GDP revision, both of which could move the dollar if they deviate materially from consensus.

Technical Picture:

GBP/USD: Resistance 1.3250 (Tuesday's high, also the level retested on 23 June per S&P Global data), then 1.3320. Support 1.3150 (recent intraday low zone), then 1.3100.
GBP/EUR: Resistance 1.1650 (round-number cap), then 1.1700. Support 1.1580 (prior session low), then 1.1535 (mid-June pivot).
EUR/USD: Resistance 1.1412 (Tuesday's close, now acting as near-term cap), then 1.1450. Support 1.1320 (recent range floor), then 1.1300.
Outlook: GBP/USD continues to trade below its EMA50, which acts as dynamic resistance and restricts recovery attempts, while EUR/USD's failure to reclaim 1.1412 keeps the short-term bias to the downside; a sustained break below 1.1320 on EUR/USD would open a move toward the 1.13 area flagged by J.P. Morgan as the lower bound of their three-quarter range.

Today's Calendar:

The 09.30am UK flash PMI is the session's pivotal release: a services reading that fails to recover above 50.0 would reinforce the stagflationary narrative weighing on sterling, while a surprise rebound above 51.0 could provide a short-lived lift toward 1.3250 resistance on GBP/USD.

Outlook:

GBP/USD remains in a fragile holding pattern between 1.3150 and 1.3250, with the balance of risk skewed to the downside so long as gilt markets price a Burnham fiscal loosening premium and the Fed's hawkish dot plot keeps the dollar bid intact; a clean break below 1.3150 would expose 1.3100, while any credible Burnham fiscal commitment or softer US data could trigger a short-covering rally toward 1.3320. EUR/USD faces a similar ceiling at 1.1412, with the pair's near-term trajectory increasingly dependent on whether the ECB's 23 July meeting delivers a second hike or pivots toward a growth-sensitive pause as Brent crude continues to deflate the energy-inflation narrative that justified June's tightening.

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.