GBP/USD and GBP/EUR market update

US CPI in Focus as Oil Slump Lifts Risk Appetite and Softens the Dollar; GBP/USD Recovers Toward 1.3454 While EUR/USD Holds 1.1250 Option Strike, Tuesday, 10 November 2026

GBP/USD: 1.3454 | GBP/EUR: 1.1958 | EUR/USD: 1.1251

Monday's sharp fall in Brent crude, which settled near $92.57 a barrel after Trump signalled a delay to further Iran strikes (Reuters), triggered a broad risk-on rally that unwound much of last Friday's post-NFP dollar strength. The FTSE 100 closed up around 1% at 10,783, and Wall Street posted its strongest session since April, with the S&P 500 gaining 2.3% and the Nasdaq 2.7%, as falling oil prices and renewed appetite for technology stocks boosted sentiment. GBP/USD has recovered from Friday's post-NFP low near 1.3380 to trade around 1.3445 in early European dealing, while EUR/USD has climbed from Monday's 1.1138 low to consolidate near 1.1222-1.1226 ahead of the US data.

Overnight & Market Tone:

GBP/USD holds positive ground near 1.3445 in the early European session on Tuesday, recovering from the 1.3411 Monday open cited in yesterday's report. Brent crude fell a further 1% to around $91.56 a barrel, its lowest level since early September, extending Monday's 5.85% slide after Trump said he would postpone further military strikes against Iran following appeals from regional leaders. The FTSE 100 is indicated up around 0.6% in pre-market trading, with futures near 10,846, roughly 63 points above Monday's close. The yield on 10-year UK gilts edged down to around 5.15% on Monday, nearing its lowest level since early September, as declining oil prices helped ease inflation worries. The 10-year Bund yield has also eased modestly, and risk sentiment across European equity futures is constructive, though the market is clearly in a holding pattern ahead of the US CPI release at 13.30 London time.

UK Data & Bank of England:

There are no major UK data releases today; the week's domestic highlight remains Thursday's Q3 GDP print, where investors are looking ahead to the UK third-quarter GDP release, which is expected to show solid quarterly growth of 0.7%, underpinned by robust services activity. The BoE backdrop is well-established following the 5 November decision. At its meeting ending on 4 November 2026, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.25 percentage points to 4%, with one member voting for a 0.5 percentage point increase to 4.25%. Despite limited evidence so far of knock-on effects from higher energy prices, the degree of inflationary pressure in the pipeline was judged sufficient to warrant the increase, with the MPC noting that where Bank Rate goes from here will depend on how the likely strength of inflationary pressures evolves. The BoE's November Monetary Policy Report noted that CPI inflation was 3.5% in September and is set to rise further in coming months, mostly because of the direct effects of higher global energy prices on fuel and household utility prices. For the December meeting on 17 December, OIS pricing as of 9 November implies a 58% probability of a further 25bp hike. That is a meaningful step down from the near-certainty priced ahead of the November decision, reflecting both the oil-driven inflation relief and the BoE's data-dependent language. Chief Economist Huw Pill has opened the door to 2026 rate cuts as outlook uncertainty rises, with his latest remarks scoring well below his historic average on the FXStreet Speechtracker, signalling a more cautious policy stance. The BoE's November Market Participants Survey median expected Bank Rate to increase to 4.25% in February, and for Bank Rate to be 3.5% two and three years ahead. For GBP, the net implication is that the hiking cycle is near its peak, which limits further sterling upside driven purely by rate differentials.

European Backdrop & EUR/USD:

The ECB held its deposit rate at 2.50% at its October meeting, as universally expected. The ECB held its deposit rate at 2.5% after raising it by 25 basis points in September, with the Governing Council saying it was well positioned to wait despite rising energy prices and higher long-term borrowing costs. Markets interpreted the decision as a hawkish pause: money markets priced in a 67% chance of a December hike at the time, and Deutsche Bank and UBS economists said another increase remained possible as the ECB seeks to prevent energy inflation from becoming persistent. Since then, the probability has firmed further: for the next ECB meeting on 17 December 2026, market pricing implies a 79% probability of interest rates increasing to 2.75%. Goldman Sachs Research expects the ECB to hike rates again in December, taking its key short-term policy rate to 2.75% from its current level of 2.5%. In a Reuters poll conducted in early October, 70 of 73 economists expected the ECB to hold its deposit rate at 2.50% in October, while 64 expected a further quarter-point rise in December, a sharp change from the previous survey when most thought the tightening cycle had ended. The European political backdrop remains a modest headwind for the euro: France's fiscal and political turmoil has fuelled volatility across European bond markets. On the positive side for EUR, economic growth has been resilient despite the energy shock from the war in Iran, with euro area GDP growing at an annualised rate of 1.2% in the first half of 2026. For EUR/USD specifically, the pair is consolidating in a 1.1220-1.1260 range this morning. The pair is awaiting the release of US inflation data, with the rate currently standing at 1.1226. A notable technical factor is the EUR/USD option expiry at the 1.1250 strike for the 10.00am New York cut, which could anchor price action around that level ahead of the data, with hedging activity potentially keeping the pair close to the strike. With the inflation figures set to arrive just before the New York cut, any significant surprise could trigger dollar flows strong enough to overwhelm the option-related influence, and a sharp inflation-driven move could easily see EUR/USD break away from the strike. The ECB-Fed rate differential is the key structural driver: both central banks are pricing one more hike, but the Fed's target range sits at 3.75%-4.00% versus the ECB's 2.50% deposit rate, a gap of 125-150bp that continues to weigh on EUR/USD relative to its pre-2022 levels. A softer US CPI today would narrow the implied December differential and provide the clearest near-term catalyst for EUR/USD to test the 1.1300 area.

US Backdrop:

The FOMC held its benchmark rate at 3.75%-4.00% at its October meeting, in line with market expectations, with the vote 10-2, with Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack in favour of a quarter-point hike. Building on last week's robust Nonfarm Payrolls report, hawkish remarks from Richmond Fed President Thomas Barkin and Chicago Fed President Austan Goolsbee have fuelled expectations of higher rates. According to the CME FedWatch Tool, the odds of a Fed rate hike at the December meeting have surged to 84%, up from 76% a day prior. Today's October CPI is the last major inflation reading before the 9 December FOMC: Deutsche Bank's US economists expect October CPI to slow sharply from September's strong reading, with both headline and core seen at 0.20% month-on-month, noting this is the last CPI release before the next Fed meeting and that markets will watch the implications for PCE inflation. Crucially, the BLS will not publish year-over-year inflation rates this month because price data was not collected in October 2025 amid the government shutdown, putting an even bigger spotlight on the month-over-month changes, with one estimate for headline CPI at 0.28%.

Technical Picture:

GBP/USD: Resistance at 1.3500 (psychological), 1.3508 (November high per Investing.com data). Support at 1.3400 (round number), 1.3380 (Monday's post-NFP low), 1.3346 (session low on Investing.com).
GBP/EUR: Resistance at 1.2000 (psychological, October month-end high per Oku Markets data), 1.2016 (November 1-month high). Support at 1.1883 (November projected low), 1.1850 (recent consolidation base).
EUR/USD: Resistance at 1.1250 (option expiry strike, near-term cap), 1.1260 (technical resistance per RoboForex), 1.1300 (round number). Support at 1.1138 (Monday's low), 1.1104 (major cushion per FXStreet), 1.1100 (psychological).
Outlook: GBP/USD holds a constructive bias above the 100-day SMA, but a hot CPI print could see a swift reversal to 1.3380; EUR/USD faces a binary outcome at 13.30, with the 1.1250 option expiry acting as a near-term magnet before the data and a potential breakout level after it.

Today's Calendar:

The 13.30 US CPI release is the dominant event: a month-on-month core print at or above 0.3% would likely cement December Fed hike expectations and push the dollar higher across all three pairs, while a 0.1% or softer reading could trigger a meaningful GBP/USD rally above 1.3500 and EUR/USD through 1.1260.

Outlook:

The oil-driven risk rally has provided a temporary tailwind for GBP and EUR against the dollar, but with CME FedWatch pricing an 84% probability of a December Fed hike, the dollar's floor remains firm and any CPI surprise to the upside would quickly reassert the post-NFP narrative of dollar resilience. Thursday's UK Q3 GDP is the next domestic catalyst for GBP: a reading in line with or above the 0.7% consensus would support the case for a further BoE hike in December and could push GBP/USD toward 1.3530, while a miss would reinforce Pill's more cautious tone and weigh on sterling relative to both the dollar and the euro.

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.