EUR/GBP continues to decline following a sharp increase earlier in March, as noted by Danske Bank’s analyst, Jesper Fjärstedt. The decline is primarily driven by changes in German fiscal policy, alongside positive PMI data reflecting growth in the UK economy.
Chancellor Reeves is set to present the Spring Statement, facing challenges to meet fiscal objectives while aiming to boost economic growth. Potential budget news may pose risks to the upward movement of EUR/GBP, yet a bearish outlook for the exchange rate persists overall.
Market Trends And Exchange Rate Outlook
Fjärstedt’s commentary underlines the trend that has been developing over the past few weeks—one that has been largely dictated by fiscal adjustments in Germany and improving metrics in the UK. These changes are more than just short-term fluctuations; they reflect shifts in expectations about both economies. The appreciation in sterling, following better-than-expected PMI prints, has reinforced the longer downward trajectory in EUR/GBP. While day-to-day movements may look erratic, the broader direction remains intact.
We now turn our attention to upcoming policy announcements, particularly those from Reeves. Efforts to balance fiscal responsibility with economic stimulation will be closely watched. Traders weighing up potential risks should consider how market sentiment could shift if fiscal easing measures are introduced. Any indication of looser policy could inject volatility, although it is unclear if that would be enough to reverse the momentum favouring sterling.
What remains evident is the pressure mounting on policymakers across Europe. Recent developments suggest that Germany’s approach to public spending will have longer-term implications for confidence levels within the eurozone. If investor sentiment continues to move in favour of UK assets, particularly if growth prospects maintain their current trajectory, then downward pressure on the EUR/GBP pair is likely to persist.
