EUR/GBP rises above 0.8400, recovers ground due to strong Euro performance

• EUR/GBP remains supported by a stronger Euro, even amid growing expectations of further rate cuts by the ECB.
• ECB's Francois Villeroy de Galhau remarked, "We are not currently in a currency war but rather a trade war situation."
• The UK's solid economic performance could lessen the chances of aggressive rate cuts by the Bank of England.

EUR/GBP is rebounding from recent losses, trading near 0.8420 during Friday's Asian session. The currency cross is supported by a stronger Euro (EUR), which is outperforming its risk-sensitive peers despite signals from European Central Bank (ECB) officials suggesting scope for further interest rate cuts due to easing inflationary pressures.

On Wednesday, Eurozone Q1 GDP growth was slightly revised down to 0.3% quarter-on-quarter, from the earlier estimate of 0.4%. Year-over-year, GDP grew by 1.2%, matching expectations. However, employment surprised to the upside, rising 0.3% QoQ in Q1, beating the previous and flash estimates of 0.1%.

ECB policymaker Francois Villeroy de Galhau stated on Friday, "We are not currently in a currency war but rather a trade war situation," adding that protectionism and uncertainty are weighing on US economic confidence. Fellow ECB member Martins Kazaks echoed the cautious sentiment, affirming that a "meeting-by-meeting approach is right" amid ongoing uncertainty over global trade policies.

Despite the Euro's strength, gains in the EUR/GBP cross may be capped by stronger-than-expected UK economic data. The UK's GDP grew by 0.7% in Q1 2025, surpassing forecasts of 0.6%, while annual growth reached 1.3%, slightly above the 1.2% estimate. March GDP also rose by 0.2%, exceeding expectations of no change, though easing from February's 0.5% gain. The robust performance may reduce the likelihood of aggressive rate cuts by the Bank of England (BoE).