Euro Weakens, Pound Strengthens: EUR/GBP Falls to Key Support Level

London, March 15, 2025 – The EUR/GBP currency pair has faced significant downward pressure this week, as weakening economic momentum in the Eurozone contrasts sharply with rising expectations of interest rate hikes by the Bank of England, driving a relative strengthening of the pound. Market sentiment has turned cautious, with traders rapidly adjusting positions, leading to the most significant weekly decline in this core European currency pair since the beginning of the year.

Technically, EUR/GBP has fallen approximately 1.2% cumulatively over the past five trading days, marking its largest weekly drop since January of this year. Currently, the short-term moving average has crossed below the long-term average, forming a "death cross,” a technical analysis pattern considered a bearish signal. The key support level points to around 0.8500, and if breached, could lead to further declines. The current resistance level is at 0.8650, while 0.8550 forms a short-term defense line. The Relative Strength Index (RSI) is at 42, indicating the market is in a neutral zone; Bollinger Bands are expanding significantly, suggesting volatility will continue to rise. This round of decline is due to the combined effect of multiple fund behaviors. Institutional investors are gradually reducing their holdings of Euro assets, while hedge funds have increased their short positions on the Euro. At the same time, corporate treasury departments are accelerating exchange rate hedging operations in response to the quarterly financial reporting window, creating sustained selling pressure, especially evident during European trading hours. Eurozone economic data further confirms the reality of slowing growth. The Manufacturing Purchasing Managers' Index (PMI) for February 2025 recorded 47.8, remaining in contraction territory for the 11th consecutive month. The Services PMI also slightly decreased from 53.4 to 52.1, with a noticeable weakening of expansion momentum. German factory orders fell by 3.2% month-on-month in January, French business confidence fell to its lowest level since the end of 2023, and Italian retail sales even fell into zero growth. Southern European countries are struggling to recover, hit by the dual impact of high energy costs and credit tightening. Although inflationary pressures have eased somewhat, they remain above the European Central Bank's 2% target. While the labor market has a low unemployment rate, it is showing initial signs of fatigue, and household consumption willingness is becoming conservative. Faced with weak domestic demand and external uncertainties, the European Central Bank is struggling to shift its policy stance, and market expectations for interest rate cuts are gradually cooling. In contrast, the British economy is more resilient, and the pound is receiving structural support.