GBP/USD + GBP/EUR Market Update

ONS Jobs Data Lands as GBP Holds Near Multi-Month Highs; ECB Decision in 48 Hours Anchors EUR/USD Near 1.1423, Tuesday, 21 July 2026

GBP/USD: 1.3441 | GBP/EUR: 1.1767 | EUR/USD: 1.1423

Sterling has held its ground near the top of its 2026 range, with GBP/USD at 1.3441 and GBP/EUR at 1.1767, as this morning's ONS July labour market bulletin (released at 7.00am) provides the first hard data point ahead of the BoE's 30 July decision. Markets widely expect the ECB to hold rates steady on Thursday, with focus falling on President Lagarde's commentary on the Middle East conflict's effect on the growth and inflation outlook. EUR/USD has spent the past week and a half in a narrow band, and today's UK data is the primary intraday catalyst.

Overnight & Market Tone:

The FTSE 100 opened the week at around 10,523-10,600, with the 10-year gilt yield rising to 5.03%, as investor sentiment was constrained by domestic political transition and ongoing Middle East geopolitical tensions. Energy majors Shell and BP are expected to benefit as Brent crude climbed above $90 per barrel, with the US-Iran conflict and disruptions to Strait of Hormuz shipping continuing to support oil prices. Risk appetite is cautious but not distressed: the FTSE's commodity-weighted composition provides a partial buffer against the geopolitical noise, and GBP/USD has held above 1.3400 through the Asian session, consistent with the pair trading near its 8-day and 21-day moving averages. EUR/USD traded near 1.1439 in late Asian trade on Monday and has spent the past week and a half chopping between 1.1400 and 1.1480 without picking a direction.

UK Data & Bank of England:

The ONS July labour market bulletin, released this morning at 7.00am, is the dominant domestic event of the week. The LFS unemployment rate for March to May 2026 came in at 4.9%, up 0.2 percentage points on the year but down 0.1 percentage points on the quarter. Annual average earnings growth was 3.4% for regular pay (excluding bonuses) and 4.3% for total pay (including bonuses) in March to May 2026; public sector regular pay growth ran at 5.5% against 2.9% in the private sector. The early PAYE estimate for June showed payrolled employees decreased by 71,000 (0.2%) on the year, but was broadly unchanged month-on-month, falling just 4,000 to 30.3 million. The wage picture is the critical variable for the MPC. Stronger wages or inflation would harden the case made by the two MPC members who already want higher rates, and would tend to support sterling; softer prints would ease that pressure. Bank Rate stands at 3.75%, held at the 18 June meeting in a 7-2 vote, with Megan Greene and Huw Pill voting for a hike to 4.00%. Bank of America economists argue multiple rate hikes are still on the table, likely in July and September. Pantheon Macroeconomics removed its forecast for a July hike after the drop in oil prices following the US-Iran extended ceasefire. In the lead-up to the June MPC meeting, the OIS curve had an upward slope of around 30 basis points by end-2026. Tomorrow's ONS June CPI print (7.00am Wednesday) will be the second and final major data input before the BoE decides on 30 July.

European Backdrop & EUR/USD:

The ECB raised its deposit facility rate to 2.25%, its main refinancing rate to 2.40%, and its marginal lending facility rate to 2.65% with effect from 17 June 2026. Eurozone HICP inflation fell to 2.8% in June from 3.2% in May, back near the ECB's target and undercutting the case for further tightening; markets now price an 88% probability the ECB holds at 2.25% on 23 July. Market participants maintain a primary bet on a potential further hike in September, when the ECB will publish fresh economic projections. The ECB's June baseline projected eurozone growth at just 0.8% in 2026, a downward revision reflecting a more pronounced impact of the Middle East conflict on commodity markets, real incomes, and confidence.

For EUR/USD specifically, the pair's inability to sustain gains despite the ECB's June hike is the defining feature of the current environment. The ECB has been the most hawkish major central bank of 2026, hiking while the Fed held, and yet the euro remains range-bound at the soft end near $1.143. The US-eurozone yield gap still favours the dollar by approximately 125-150 basis points, and eurozone growth is seen at just 0.8%, which explains why the ECB's tightening has not translated into sustained EUR/USD strength. The July 23 ECB decision and the July 29 Fed meeting make the next four to six weeks decisive for EUR/USD's second-half trajectory. For treasurers with direct EUR/USD exposures, the base case is a hold-and-signal outcome from the ECB on Thursday that keeps the pair anchored in its 1.1400-1.1480 range, with the risk being a hawkish signal on September that briefly lifts EUR/USD toward 1.1500 before dollar yield support reasserts. A hold explicitly framed as the peak would be the clearest case for a softer euro, removing the last of the incremental rate support the June hike implied. Treasurers with EUR receivables should note that GBP/EUR at 1.1767 remains near its best levels of 2026, with the Bank of England's 3.75% Bank Rate sitting 150 basis points above the ECB's 2.25%, and with eurozone inflation falling, that gap is no longer expected to narrow imminently.

US Backdrop:

The next FOMC decision falls on 29 July 2026; the Fed held at 3.50-3.75% on 17 June in a unanimous vote, with the median 2026 dot rising to 3.8% in a notably hawkish shift. At the ECB Forum in Sintra on 1 July, Chair Warsh stated that "prices are too high" and reaffirmed his intention to deliver price stability. CME FedWatch data currently assigns approximately 25% probability to a 25 basis point rate hike at the 28-29 July FOMC meeting. There is no major US data release today; the USD tone is therefore driven by residual positioning ahead of the Fed decision next week, with Brent above $90/bbl providing a mild safe-haven bid for the dollar against risk-sensitive currencies.

Technical Picture:

GBP/USD: Resistance at 1.3480 (intraday), then 1.3532 (16 July peak, multi-month high). Support at 1.3400 (round number and recent consolidation base), then 1.3345 (17 July low area).
GBP/EUR: Resistance at 1.1800 (psychological level and 16 July high), then 1.1850 (upper end of 2026 forecast range). Support at 1.1720 (recent session lows), then 1.1650 (mid-range support).
EUR/USD: Resistance at 1.1480 (top of recent 10-day range), then 1.1500 (round number). Support at 1.1400 (key technical floor tested multiple times), then 1.1350.
Outlook: The 1.1400 zone in EUR/USD has absorbed multiple tests already, and if this level holds on a weekly closing basis the ascending channel structure remains intact, which would itself be a constructive signal. GBP/USD retains a positive bias while above 1.3400, but a soft wage print this morning could see a swift test of that level before Wednesday's CPI data restores direction.

Today's Calendar:

The regular pay print in today's ONS release is the single number the MPC will weigh most heavily at 30 July; a reading above 3.5% would materially shift OIS pricing toward a hike and support GBP across the board.

Outlook:

Both GBP pairs are unusually sensitive to this week's UK data because the Bank of England's 30 July decision is finely balanced. A firm wage print today followed by a sticky CPI tomorrow would likely push GBP/USD toward 1.3500 and GBP/EUR toward 1.1820, while a double miss would expose the 1.3400 and 1.1720 supports respectively; EUR/USD is likely to remain anchored near 1.1420-1.1450 until Thursday's ECB decision, with the primary risk being a hawkish Lagarde signal that briefly lifts the pair before the Fed's 29 July meeting reasserts dollar yield dominance.

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.