Sterling remains under sustained pressure following the release of weaker-than-expected UK inflation data. The notable slowdown in inflation has strengthened market expectations that the Bank of England (BoE) could adopt a more accommodative monetary policy stance in the coming months, a prospect that continues to weigh heavily on the pound. Lower interest rates typically reduce a currency's yield appeal to investors, and the prospect of a faster easing cycle has amplified selling pressure on sterling. Concurrently, the euro is trading within a relatively narrow range as investors await fresh economic signals from the eurozone to determine its next directional move. The European Central Bank has already initiated a rate-cutting cycle, making incoming data critical for assessing whether additional easing is warranted at upcoming meetings.

Market participants are also maintaining a cautious stance amid an ongoing escalation of geopolitical tensions in the Middle East. The United States continues to conduct military strikes on targets in Iran, a development that is actively supporting demand for traditional safe-haven assets, including the US dollar. This dynamic is subsequently limiting the recovery potential of European currencies.

In the coming days, market attention will firmly center on the preliminary Purchasing Managers' Index (PMI) figures from Germany, France, the United Kingdom, and the broader eurozone. These reports, compiled by S&P Global, serve as leading economic indicators based on surveys of private-sector purchasing managers and are among the earliest reads on business activity each month. They will offer an early gauge of business conditions and economic health at the beginning of the third quarter. The data holds particular significance for the euro, as it could directly shape expectations regarding the ECB's upcoming policy moves. Stronger-than-anticipated PMI figures may provide tangible support for the single currency, whereas weaker readings could fuel expectations of further policy easing by the ECB. Additionally, the weekly US initial jobless claims report will offer further insight into the current strength of the American labor market, a data point the Federal Reserve has repeatedly emphasized as central to its own policy calculus.

EUR/USD

EUR/USD has entered a consolidation phase following an inability to breach and test the key resistance level at 1.1500. Technical analysis suggests the currency pair could retreat toward the 1.1330–1.1370 region, as a bearish harami pattern has emerged on the daily timeframe. A renewed upward correction is seen as more probable only if there is a decisive breakout and daily close above the 1.1500 threshold.

Key events for EUR/USD:

• Today at 09:45 (GMT+3): France Flash PMI
• Today at 10:20 (GMT+3): Speech by Bundesbank Executive Board member Sabine Mauderer
• Tomorrow at 10:00 (GMT+3): Germany GfK Consumer Climate Index

GBP/USD

GBP/USD is experiencing a notable bearish pullback after buyers failed to establish a sustained foothold above the 1.3500 mark. A bearish harami pattern has also materialized on the daily chart, heightening the probability of another test of the immediate support zone situated between 1.3320 and 1.3340. This bearish technical scenario would only be invalidated by a decisive daily close above 1.3400.

Key events for GBP/USD:

• Today at 13:00 (GMT+3): UK CBI Industrial Trends Orders
• Today at 15:30 (GMT+3): US Initial Jobless Claims
• Tomorrow at 11:30 (GMT+3): UK Flash Manufacturing PMI

Summary

The pound remains heavily pressured by softer domestic inflation data, while the euro consolidates as traders eagerly await new economic indicators from the eurozone. The upcoming preliminary PMI releases are poised to act as the primary catalysts for European currencies, potentially reshaping market forecasts for future policy decisions by both the ECB and the BoE. Meanwhile, US macroeconomic data and geopolitical developments in the Middle East are expected to remain critical drivers of broader market sentiment.