GBP in focus: 15th September charts displaying a symmetrical triangle

The pound opens the week with markets braced for one of the busiest event calendars of the year. Wages and unemployment arrive Tuesday, inflation on Wednesday, and the Bank of England decision Thursday. Together they will shape whether sterling can finally break out of the ranges that have defined late summer.

Against the euro, the pound has been trading in an increasingly narrow range since July, building pressure for a potential breakout. Against the dollar, it sits just beneath a major resistance zone that has blocked several rallies. With central banks now in focus on both sides, the week ahead will decide whether those barriers hold or finally give way.

GBP/EUR: Coiling Spring 

The pound-to-euro exchange rate begins the week in the mid 1.15's, right in the middle of its recent range. Since midsummer, volatility has been fading as the pair compresses into a triangular pattern. History shows that such calm rarely lasts, and with heavy UK data due, the stage is set for a sharp move.

On the UK side, wages and unemployment data will be watched closely for signs of weakness, followed by inflation figures midweek. Stronger-than-expected prints would make it harder for the Bank of England to cut again and could offer the pound some much-needed support. Softer outcomes would tilt momentum back toward the euro.

In Europe, the ECB has taken a firmer line. Growth prospects have been revised higher and policymakers signalled that the cutting cycle is over. This has helped to underpin the single currency. Political noise in France, including the recent credit downgrade, continues to linger but has not yet damaged euro confidence.

The key question is whether sterling breaks upward through 1.16 or slips lower to retest the summer lows. Either way, the long period of muted trade looks ready to end.

Insight: The Coiled Spring in GBP/EUR

One way to understand the recent pound-to-euro price action is to picture a coiled spring. Since July, the pair has been moving in ever-tighter ranges. Buyers step in whenever the rate dips, while sellers appear as soon as it climbs. Each push higher or lower gets smaller, and volatility fades.

In technical terms this is known as a symmetrical triangle, but “coiled spring” is the better image. Pressure builds as both sides wait. When a decisive catalyst arrives, the spring releases its energy. The result is usually a sharp and sudden breakout.

This week’s UK data cluster, with wages on Tuesday, inflation on Wednesday, and the Bank of England on Thursday, provides exactly the kind of trigger that could set the spring loose.

The chart itself does not tell us whether the move will be up or down. It simply shows that the quiet phase is almost over. If sterling breaks above the upper edge of the range, buyers may quickly drive it toward the summer highs. If the euro takes control, the move lower could be just as fast.

For corporates and traders the message is clear. A period of calm trading rarely lasts forever. When the spring uncoils, the opportunity to capture favourable levels can appear and disappear very quickly.

The pound-to-dollar rate trades near recent highs, pressing against the ceiling that has capped progress in recent weeks. After three consecutive weekly gains, momentum is slowing, and central bank guidance will decide the next direction.

In the US, the Federal Reserve is expected to cut rates this week. Markets believe this will be the first in a series of reductions before the year is out. A cooling labour market has given the Fed cover to act, leaving the dollar under pressure. For analysis of how dovish Fed policy impacts currency markets, see our guide to Fed dovish signals.

In the UK, the Bank of England is set to hold steady. Inflation remains uncomfortably high, which makes another cut before year-end less likely. That contrast in policy direction, with the Fed easing and the BoE holding, keeps the pound relatively attractive. 

The 1.36 barrier is the line in the sand. A decisive break would open the way toward the summer highs. Another failure could see the pair drift back into consolidation. The balance of risks leans to the upside, but resistance is formidable.

The euro holds firm at 1.1730, supported by the contrast between the ECB and the Fed. The European Central Bank has made it plain that further cuts are off the table. Growth forecasts have been revised higher, inflation is expected to stay close to target, and President Lagarde has declared the disinflation process largely complete.

In the US, by contrast, the Fed is about to begin cutting, with more easing likely before the year is out. That policy split is a strong fundamental driver for euro strength against the dollar, and major banks continue to forecast higher levels into year-end.

The risk this week lies in the Fed’s tone. A more aggressive cut or dovish guidance would reinforce euro gains. A cautious message could temporarily stall the trend. In the bigger picture, the divergence narrative remains intact, and euro buyers still have the upper hand.

Strategy for Businesses

Sterling is heading into a defining week. Against the euro, a long period of consolidation looks set to end as data and the BoE collide. Against the dollar, the 1.36 ceiling is under pressure again, with the Fed’s pivot creating scope for a breakout. Meanwhile, the euro remains supported by a central bank that has closed the door on further cuts.

For businesses, the message is clear. The calm of late summer is over. With central banks and data in play, markets are primed for movement. Being ready to act quickly and selectively will be the key to securing favourable rates in the days ahead. For strategies to protect against currency volatility, see our comprehensive forward contracts guide.