GBP/USD + GBP/EUR Market Update

GBP/USD Slips Further as Brent Recovers Toward $96 on Stalled Iran Talks, While EUR/USD Holds Above 1.1600 Ahead of the 11 June ECB, Thursday, 28 May 2026

GBP/USD: 1.3403 | GBP/EUR: 1.1542 | EUR/USD: 1.1612

All three pairs enter Thursday's session on the back foot for sterling, with GBP/USD slipping to 1.3403 as Brent crude climbed back toward $96 per barrel on Thursday, recovering some losses from the previous session as negotiations between the US and Iran remained deadlocked over several key issues. The Iran deal narrative has whipsawed markets across the week; Wednesday's sharp oil sell-off on optimism has partially reversed, keeping risk sentiment fragile and the dollar bid. The 11 June ECB and 18 June BoE remain the structural anchors for positioning into month-end.

Overnight & Market Tone:

GBP/USD has drifted from Wednesday's 1.3444 close to 1.3403, a loss of around 41 pips, as the partial Brent recovery restored some safe-haven dollar demand. EUR/USD technical analysis suggests the pair has pierced support in the 1.1633-1.1611 zone, with the pair trading at approximately 1.1622 as of this morning. GBP/EUR has eased to 1.1542 from 1.1547, a modest move that reflects broadly similar pressure on both sterling and the euro against the dollar. Market attention is focussed on upcoming speeches from BoE policymakers for monetary policy signals, as well as political developments surrounding Prime Minister Keir Starmer following Labour's regional election setbacks, with investors also monitoring Middle East developments and persistent hopes that an agreement to ease tensions and reopen the Strait of Hormuz could still be reached. UK gilt yields, which fell to 4.85% on Wednesday, their lowest level since 20 April, may stabilise or edge back up if Brent holds its recovery. FTSE 100 pre-market futures point to a cautious open, consistent with the mildly risk-off tone.

UK Data & Bank of England:

There are no tier-one UK data releases scheduled for today, leaving sterling to trade on global risk sentiment and the evolving Iran-oil dynamic. The domestic fundamental backdrop remains challenging: the BoE projected CPI at 3.1% in Q2, 3.3% in Q3, and "to rise somewhat further in Q4," driven by higher energy and food prices, a trajectory that has materially complicated the MPC's path. At its meeting ending 29 April 2026, the MPC voted 8-1 to maintain Bank Rate at 3.75%, with one member voting to increase Bank Rate by 0.25 percentage points to 4%. The committee remains divided on its next move: Governor Andrew Bailey said what happens next "will depend on the size and duration of the energy price shock," adding that he cannot give a "cast iron assurance" there will be no rate increase. Deputy Governor Breeden has counselled patience, while Chief Economist Huw Pill, the sole MPC member to vote for a hike last month, compared the Bank's next moves with the crew of the Apollo 13 mission, steering back to earth by manual course corrections. OIS pricing reflects this ambivalence: traders have trimmed bets on BoE rate hikes, now expecting roughly 40 basis points of tightening by year-end, with approximately a 50% probability of a hike at the 18 June meeting. That near-coin-flip pricing is a key source of GBP volatility; any BoE speaker today who tilts hawkish could provide a modest floor for GBP/USD.

European Backdrop & EUR/USD:

The ECB kept rates unchanged at its April meeting, with the main refinancing rate at 2.15% and the deposit facility at 2.00%, as policymakers adopted a cautious stance assessing the impact of the Iran conflict on inflation and growth, noting that upside risks to inflation and downside risks to growth have intensified. Flash data showed eurozone inflation jumped to 3% in April, driven largely by a rise in energy costs. Despite the cautious stance, markets are fully pricing in three ECB rate hikes in 2026, with the first potentially arriving as early as June. More specifically, the next decision is on 11 June 2026, with markets pricing an 86% probability of a 25bp hike. The ECB's own scenario analysis is unambiguous: a prolonged disruption in the supply of oil and gas would result in inflation being above, and growth being below, the baseline projections. ECB President Christine Lagarde and board member Isabel Schnabel have signalled the bank will take its time before deciding on further tightening, but the market is not waiting for explicit guidance. On EUR/USD specifically: the pair has slipped from Wednesday's 1.1643 to 1.1612, sitting just above the 1.1611 technical support level. The structural driver for EUR/USD remains the ECB-Fed policy differential: layered on a fractured FOMC committee, the net effect is a narrowing dollar yield premium against the BoE and ECB through H2. EUR/USD spent much of early 2026 trading in the 1.16-1.18 region, and most institutional forecasts now cluster above the average trading ranges seen between 2022 and 2024, reinforcing the idea that the market may be entering a new phase of broader US dollar weakness. For treasurers with direct EUR/USD exposures, the near-term risk is a test of 1.1580-1.1600 if Brent continues to recover and the dollar bid extends; the medium-term bias, anchored by ECB hike expectations, remains modestly EUR-supportive. EU-US trade tensions remain a secondary risk: Trump has threatened "much higher" tariffs on EU goods unless the bloc eliminates its own tariffs on US products by 4 July, and a breakdown in EU-US trade talks would be euro-negative.

US Backdrop:

The 28-29 April FOMC held rates at 3.50-3.75% on an 8-4 vote, the most dissents since October 1992, and with Powell's term as Chair having ended 15 May, Warsh is expected to lead the 16-17 June FOMC. The latest US CPI reading came in at 3.8%, well above the Fed's 2% target, and with markets moving to bet against a rate cut, Treasury yields across many time frames have spiked, with 30-year Treasuries above 5%. Futures markets indicate virtually no chance of a rate cut at the June meeting, according to CME FedWatch. US weekly jobless claims are due today and represent the main scheduled USD catalyst; a surprise in either direction could shift the near-term dollar tone.

Technical Picture:

GBP/USD: Resistance at 1.3444 (Wednesday's close), then 1.3480 (Tuesday's high) and 1.3612 (downward trendline). Support at 1.3413 (22 May low); a daily close below this level would expose a deeper pullback toward the 20 May low at 1.3375.
GBP/EUR: Resistance at 1.1547 (Wednesday's close), then 1.1578 (Tuesday's high). Support at 1.1535 (recent range floor) and 1.1500 (psychological).
EUR/USD: Technical analysis suggests the pair has pierced support in the 1.1633-1.1611 zone and may slide to the next support band of 1.1525-1.1492 on a sustained break. Resistance sits at 1.1643 (Wednesday's high), then 1.1680.
Outlook: GBP/USD's failure to hold above 1.3444 keeps the short-term bias negative toward 1.3375-1.3413; EUR/USD's hold above 1.1611 is the key intraday test, with a break opening 1.1525 and a bounce targeting 1.1643-1.1680.

Today's Calendar:

The 10.00am eurozone CPI flash estimate is the single most important scheduled release for EUR/USD today: a print above the 2.4% consensus would reinforce the case for an ECB hike on 11 June and provide a near-term floor for the pair, while a soft reading could accelerate the test of 1.1611 support.

Outlook:

GBP/USD's bias remains modestly negative into the weekend as long as Brent holds its recovery above $95 and OIS pricing for the 18 June BoE stays near the 50% mark; a clean break below 1.3375 would open 1.3320, while any credible Iran deal headline would likely push the pair sharply back above 1.3450. For GBP/EUR, the pair is range-bound in the 1.1535-1.1580 corridor until the ECB-BoE policy divergence sharpens on 11-18 June, with the risk skewed modestly toward EUR strength if the ECB hikes while the BoE holds.

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.