GBP/USD + GBP/EUR Market Update

Post-Sintra Payrolls Day: GBP/USD Extends Gains to 1.3318 as Warsh Silence Lifts All Boats; EUR/USD Firms to 1.1399, Thursday, 02 July 2026

GBP/USD: 1.3318 | GBP/EUR: 1.1683 | EUR/USD: 1.1399

Sterling and the euro both firmed overnight after the ECB's Sintra Forum concluded with all three major central bank chiefs - Warsh, Lagarde, and Bailey - signalling a collective retreat from forward guidance rather than delivering fresh hawkish signals, removing the immediate catalyst for further dollar strength. At the panel, Warsh suggested inflation risks had eased, Lagarde said risks to inflation and growth were "probably more balanced" now, and Bailey reiterated the economy was softening. The session's pivotal event is now the US Bureau of Labor Statistics June employment report, due at 1.30pm London time, which markets will read as the primary input for the 29 July FOMC decision.

Overnight & Market Tone:

GBP/USD rose to 1.3281 on 2 July, up 0.04% from the previous session, with our database showing a further extension to 1.3318 in early London trade, the highest level since mid-June. GBP/EUR has firmed to 1.1683, recovering further from the 1.1612 area seen at the start of the week, as the euro's post-Sintra relief rally has been slightly less pronounced than sterling's. UK 10-year gilt yields climbed toward 4.80%, rebounding from two-month lows and tracking a rise in US Treasury yields, though the move was orderly rather than disorderly. FTSE 100 futures point to a modest opening near 10,535, with Brent crude futures around $73 per barrel. Risk sentiment is broadly constructive, with the VIX subdued and European equity futures steady ahead of the payrolls release.

UK Data & Bank of England:

There are no tier-one UK data releases scheduled for today; the domestic calendar is quiet ahead of next week's ONS data slate. The BoE narrative, however, continues to evolve in the wake of Sintra. Governor Bailey reiterated his dovish stance at Sintra, noting that UK policymakers see a softening economy and that the May rate hold at 3.75% reflected this view; he ruled out near-term cuts, citing persistent inflation risks, though he noted encouragement from falling energy prices, and stressed the BoE would not rush to react to rising oil prices as inflation remained on track to hit 2%, albeit later than hoped. The June MPC minutes confirmed the structural tension: the MPC voted 7-2 to maintain Bank Rate at 3.75%, with two members voting to increase Bank Rate by 0.25 percentage points to 4%. Those dissenters were chief economist Huw Pill and external member Megan Greene. The BoE said, based on energy market pricing as of 15 June, that CPI inflation was expected to be "a little under 3% in 2026 Q3" and "a little over 3.25% in Q4." UK CPI held at 2.8% in May, but services inflation rose to 3.7%, keeping the MPC cautious. OIS pricing, as of the June meeting, implied traders were pricing in one interest rate hike this year, though the outlook remains highly uncertain. The base case for the 30 July meeting is a hold at 3.75% with a hawkish tilt while services inflation stays elevated, with a realistic chance of further dissents for a hike. Sterling's near-term support rests on the BoE-ECB rate differential of 150 basis points remaining intact, though following the June meeting and despite the two hawkish dissenters, the narrative has shifted significantly toward the BoE being on hold for the foreseeable future.

European Backdrop & EUR/USD:

The ECB Governing Council raised its three key interest rates by 25 basis points at its June meeting, with the deposit facility rate now at 2.25%. The ECB cited the war in the Middle East as generating inflation pressures, with headline inflation expected to average 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028 in the baseline projections. The baseline sees economic growth at an average of 0.8% in 2026, a downward revision reflecting a more pronounced impact of the war on commodity markets, real incomes, and confidence. The next ECB decision is 23 July. At Sintra, Lagarde said risks to inflation and growth were "probably more balanced" now, a shift from the hawkish opening remarks she delivered at the start of the forum on 29 June, when she warned that "the resilience Europe has built means rate hike effects on the economy are more contained" and that the ECB "can raise rates to address inflation without fear it becomes a source of financial stress." The softening of her tone by the closing panel, combined with the June flash Eurozone HICP coming in cooler than expected, has reduced market conviction around a second ECB hike at the 23 July meeting. In June, EUR/USD defied its historical seasonal bullishness, falling 2% to test one-year lows near 1.1400; the dollar continued to benefit from the relative strength of the US economy, and with Eurozone inflation data pushing back expectations for additional ECB rate hikes, the near-term downtrend could continue despite the modestly bullish seasonal tendency. EUR/USD sits at 1.1399 this morning, essentially unchanged from Tuesday's close, having failed to sustain a break above 1.1410 after Warsh's Sintra remarks. The pair's near-term direction is almost entirely a function of today's payrolls print: EUR/USD dropped below the 1.1400 level in Wednesday's North American session in response to the persistent recovery in the dollar, which found extra support following the cautious tone from Warsh at the ECB Forum. For treasurers managing direct EUR/USD exposures, the 1.1400 handle is the line of demarcation: a strong payrolls print is likely to push the pair back toward the 1.1324 recent low, while a soft number could open a test of 1.1450-1.1480. J.P. Morgan Research sees EUR/USD hovering between 1.13 and 1.15 over the next three quarters, consistent with a structurally dollar-supportive environment driven by the Fed-ECB rate differential and the relative growth gap. The BoE-ECB spread of 150 basis points continues to provide GBP/EUR with a structural floor, though any further ECB tightening without a matching BoE move would compress that differential and weigh on the cross.

US Backdrop:

The Federal Reserve left rates unchanged in Kevin Warsh's first meeting as chair, holding the target range at 3.50%-3.75%, but adopted a hawkish tone in its post-meeting policy statement, noting commitment to bringing down inflation. The updated dot plot shows a median year-end 2026 rate of 3.8%, up sharply from 3.4% in March, with nine of 18 officials pencilling in at least one rise this year. At Sintra, Warsh stressed that delivering price stability remains the Fed's primary objective, underscored the Fed's independence from political pressure, reiterated that the central bank will no longer provide traditional forward guidance, and declined to comment on the outlook for the upcoming policy meeting, saying decisions will be based on incoming data. Today's June non-farm payrolls (1.30pm London, scheduled for release at 8.30am ET on Thursday, 2 July) is the session's dominant risk event; the US economy added 172,000 jobs in May, well above forecasts of 85,000, setting a high bar for the June print.

Technical Picture:

GBP/USD: Resistance at 1.3320 (current session high / 50-day moving average area), then 1.3380 and 1.3450. Support at 1.3245 (Wednesday's close), 1.3200, and 1.3161 (recent trough).
GBP/EUR: Resistance at 1.1700 (psychological), then 1.1740. Support at 1.1640, 1.1612 (Monday's open), and 1.1580.
EUR/USD: Resistance at 1.1410 (Wednesday's intraday high), then 1.1450 and 1.1480. Support at 1.1370, 1.1324 (recent multi-week low), and 1.1300 (round number).
Outlook: GBP/USD and EUR/USD have both recovered from their June troughs but remain below their pre-FOMC levels, with the technical bias neutral-to-cautious ahead of payrolls; a strong US employment print would likely reassert the dollar's structural bid and push both pairs back toward their lower supports, while a miss would extend the post-Sintra relief rally.

Today's Calendar:

The 1.30pm non-farm payrolls release is the session's sole market-moving event; given the Fed's explicit shift to data-dependency and the absence of forward guidance from Warsh at Sintra, the payrolls number and the average hourly earnings component will carry unusually high weight in shaping expectations for the 29 July FOMC decision.

Outlook:

GBP/USD's recovery to 1.3318 and EUR/USD's hold at 1.1399 both remain conditional on the payrolls print: a June number above 180,000 with firm wages would likely reverse both pairs materially, reasserting the Fed hike premium and pushing GBP/USD back toward 1.3200 and EUR/USD toward 1.1330-1.1350, while a sub-130,000 reading would extend the post-Sintra relief rally and open 1.3380 and 1.1450 respectively. Beyond today, the dominant calendar risk for all three pairs is the late-July cluster of decisions - ECB on 23 July, Fed on 29 July, and BoE on 30 July - where the absence of forward guidance from all three central banks, confirmed at Sintra, means two-way volatility around those dates is likely to be materially higher than in recent cycles.

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.