GBP/USD + GBP/EUR Market Update

GBP Slips as Brent Surges to $85 on Hormuz Re-escalation; US CPI and Bailey's Mansion House Speech Define the Session, Tuesday, 14 July 2026

GBP/USD: 1.3358 | GBP/EUR: 1.1723 | EUR/USD: 1.1395

GBP/USD has retreated roughly 70 pips from last Thursday's 1.3425 peak, with the pair opening around 1.3358 as a fresh bout of US-Iran military exchanges over the weekend drove Brent crude to its highest level in a month. Oil prices surged to their highest level in a month as renewed hostilities between the United States and Iran continued for a third consecutive day, with Brent futures for September delivery standing at $85.67 a barrel as of 07:00 GMT. GBP/EUR has eased to 1.1723, while EUR/USD has drifted to 1.1395, both pairs consolidating ahead of today's dual catalysts.

Overnight and Market Tone:

GBP/USD dipped at the start of the week as renewed tensions in the Middle East briefly boosted demand for the safe-haven US dollar before recovering some ground, trading at $1.3391 and rebounding from an overnight low of $1.3369. GBP/EUR opened the new week on the defensive as renewed tensions in the Middle East encouraged demand for safer assets and supported the euro, with the pair trading around 1.1713, down roughly 0.2% on the day. The FTSE 100 edged lower on Monday as investors assessed renewed tensions in the Middle East after the US and Iran exchanged fresh airstrikes over the weekend; Tehran claimed it had closed the Strait of Hormuz, though President Trump rejected the assertion, while energy stocks outperformed as higher oil prices lifted Shell and BP. UK 10-year gilt yields fell to 4.89% on Monday, retreating from one-month highs and tracking a drop in crude prices as US-Iran peace talks continue despite recent hostilities. The VIX index, per Yahoo Finance data, was last seen around 17.16, consistent with a cautious but not panicked risk backdrop.

UK Data and Bank of England:

There are no scheduled UK data releases today, leaving the domestic agenda entirely in the hands of Governor Bailey. Bailey is due to speak at the Annual Financial and Professional Services Dinner at Mansion House this evening, with the text to be published at 3.00pm on 14 July. If Bailey maintains a similarly cautious tone to his previous comments on monetary policy, it may cement bets that the Bank will leave interest rates on hold through 2026 and that its next move will be a rate cut in 2027, likely triggering some weakness in sterling. However, if the renewed tensions in the Middle East prompt a slightly more hawkish tone from Bailey, the pound may strengthen through the European session. The backdrop he faces is materially more complex than at the June meeting: at its meeting ending on 17 June 2026, the MPC voted 7-2 to maintain Bank Rate at 3.75%, with two members voting to increase Bank Rate by 25 basis points to 4.00%. Chief economist Huw Pill and external member Megan Greene both voted to increase interest rates to 4.00%. On 18 June, the Bank said CPI inflation was expected to be "a little under 3% in 2026 Q3" and "a little over 3.25% in Q4." The most recent ONS data showed UK CPI rose 2.8% in the 12 months to May 2026, unchanged from April, with services inflation at 3.7% in May, up from 3.2% in April. The uncertainty from Hormuz has heightened inflation concerns, leading investors to bet on further BoE rate hikes; gilt yields rose 10 basis points over the past week, with money markets pricing in at least one increase and a 25% chance of a second. On the political front, Andy Burnham is set to become the new Labour party leader when the leadership contest ends on Friday 17 July, and is expected to be formally appointed as prime minister on Monday 20 July, a transition that markets have broadly priced as a stability-positive event for sterling. The next MPC decision is 30 July 2026, alongside a new Monetary Policy Report.

European Backdrop and EUR/USD:

The ECB Governing Council raised its three key interest rates by 25 basis points at its June 11 meeting, with the deposit facility rate increased to 2.25% with effect from 17 June 2026. The ECB stated that the war in the Middle East is generating inflation pressures, and that in the baseline of the new Eurosystem staff projections, headline inflation is expected to average 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028. ECB policymakers agreed to avoid providing guidance on the future path of interest rates following June's first rate hike since 2023, citing elevated economic uncertainty; officials stressed that communication should remain neutral, neither signalling a series of further hikes nor suggesting the move was a one-off. The next ECB meeting is Thursday 23 July 2026 at 13:45 CET, with President Lagarde's press conference following at 14:30 CET. Without new staff projections at July, Lagarde will rely on the existing baseline and any interim data updates; key signals will include whether the ECB still characterises inflation risks as "tilted to the upside" and whether language around future rate moves uses conditional framing. In the absence of any notable eurozone economic indicators today, movement in the euro may remain tied to wider market trends. For EUR/USD specifically, the pair has retreated from last week's 1.1440 area to 1.1395, a decline of roughly 45 pips. The pair is caught between two competing forces: a hawkish ECB that has now moved its deposit rate to 2.25%, and a Fed that held at 3.50-3.75% at its June meeting but whose dot plot was revised upward. At the mid-June FOMC meeting, the first with Kevin Warsh at the helm, the Fed struck a decidedly hawkish tone, bumping its median 2026 inflation forecast up to 3.6% from 2.7% and nudging its median fed funds rate projection to 3.8% from 3.4%, signalling that rates will be staying higher for longer. The BoE-ECB rate differential, with Bank Rate at 3.75% versus the ECB deposit rate at 2.25%, remains a 150 basis-point structural support for GBP/EUR. EUR/USD's near-term direction today hinges almost entirely on the US CPI print: a soft headline reading could push the pair back towards 1.1440, while a core surprise to the upside would reinforce the Fed's hawkish stance and drag EUR/USD towards 1.1350. The euro manages to hold above $1.14 as oil marches towards $80/bbl on US-Iran escalation, though today's re-escalation to $85 adds a fresh inflationary overlay that complicates the ECB's "data-dependent" framing ahead of the 23 July meeting.

US Backdrop:

Today is a double-event day for the dollar. The US June CPI is released at 8:30am Eastern Time, which is 1.30pm UK time. The consensus forecast is for headline CPI to fall 0.1% on a seasonally adjusted monthly basis, bringing the annual rate from 4.2% (May 2026) to approximately 3.9%, while core CPI is expected to hold at approximately 2.9% year-on-year with a monthly increase of around 0.2%. This sharp divergence, a cooling headline figure driven purely by an energy swing paired with sticky core inflation, creates a highly complicated backdrop for the Fed. Simultaneously, Fed Chair Kevin Warsh is scheduled to deliver the monetary policy report to Congress on the same day the CPI drops, and will almost certainly face questions about the Fed's rate path, with the morning's inflation number providing fresh ammunition for both hawks and doves. This CPI report is the last major inflation data point before the next FOMC meeting in July, with markets currently assigning a 65% probability that the Fed will hold rates steady.

Technical Picture:

GBP/USD: Resistance at 1.3391 (Monday's intraday recovery high), then 1.3425 (last week's peak). Support at 1.3358 (current spot), then 1.3320 and 1.3161 (late-June trough).
GBP/EUR: Resistance at 1.1739 (last week's high per Wise data), then 1.1750. Support at 1.1713 (Monday's low), then 1.1679 and 1.1600.
EUR/USD: Resistance at 1.1440 (last week's range top), then 1.1480. Support at 1.1370, then 1.1350 and 1.1300.
Outlook: GBP/USD and EUR/USD are both consolidating below recent highs with a mild offered tone ahead of the US CPI print; a soft headline-only reading is unlikely to sustain a rally given sticky core expectations, while a hot core surprise would likely push GBP/USD below 1.3320 and EUR/USD towards 1.1350.

Today's Calendar:

The 1.30pm US CPI release is the session's primary volatility event; any core print above 0.3% month-on-month would likely strengthen the dollar materially across all pairs, while the Bailey text at 3.00pm provides a secondary GBP catalyst that could amplify or offset the CPI reaction in the final two hours of the London session.

Outlook:

The near-term bias for GBP/USD and EUR/USD is cautiously offered ahead of 1.30pm, with Brent near $85 adding an inflationary overlay that limits the scope for a sustained dollar sell-off even on a soft headline CPI reading. Treasurers with USD payables who have not yet acted should note that GBP/USD at 1.3358 remains materially above the late-June trough near 1.3161, and the combination of today's CPI, Warsh's testimony, and the 23 July ECB and 30 July BoE and Fed meetings creates a genuine two-way risk window; those with EUR payables should monitor the 1.1370 support level in EUR/USD closely, as a break lower would signal a renewed dollar bid that could persist into the FOMC.

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.