EUR/GBP. Analysis and Forecast

[Ben Graham]

For the second consecutive day, the EUR/GBP pair is moving higher, breaking above the 100-day SMA amid weak data from the UK labor market. The UK Office for National Statistics reported an increase of 28,600 in unemployment benefit claimants in January, exceeding forecasts, while the unemployment rate for the three months to December rose to 5.2%. Average earnings excluding bonuses slowed to 4.2% year-over-year, in line with expectations, while including bonuses they declined to 4.2% from the previous 4.6%.

These indicators point to continued cooling in the UK labor market at the start of 2026, reinforcing market expectations of a 25-basis-point rate cut by the Bank of England in March. This adds pressure on the British pound and serves as the main driver behind EUR/GBP's upward movement.

Meanwhile, the euro remained stable after Germany's final Consumer Price Index (CPI) data confirmed the preliminary estimate of 2.1% year-over-year growth for January, which is unlikely to significantly affect European Central Bank forecasts.

Overall, the fundamental backdrop continues to suggest that the path of least resistance for spot prices is upward.

From a technical perspective, continued strength and buying above the 100-day SMA favor the bulls. The next key resistance level ahead of further gains stands at 0.8745. A break above this level would confirm the positive outlook and allow the pair to return to the psychological 0.8800 level for the first time since December 2025. Daily chart oscillators have moved into positive territory, supporting the bullish bias.

However, if the pair fails to hold above the 100-day SMA near 0.8725, bulls will still have two additional support levels—the 50-day SMA and the 20-day SMA—to maintain the upward scenario. A break below these levels would weaken the bullish momentum.

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