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Pound Sterling's impressive rebound has already hit the buffers.
The Pound put in a strong rebound against the Euro through the final stages of August, but on the eve of August the rally looks to be faltering.
The Pound to Euro exchange rate (GBP/EUR) rose from a Monday low 1.1415 to peak at 1.1612 in early trade Thursday, before the Euro found its feet again and engaged a broad rally.
Declines in EUR/USD are testament to this resilience, which is helping EUR/GBP higher too. Looking at the inverse, GBP/EUR now appears capped below the 1.16 level, which appears to be an interim graphical support.
The Euro's recovery could hint that its recent selloff and associated appreciation by GBP was a potential month-end repositioning movement. This is where currencies adjust as billions worth of currency are sold and bought by global fund managers looking to rebalance their portfolio's currency exposure.
From a technical perspective, the move above the 21-day exponential moving average, shown in the chart below, marked an important development as it signalled the start of a more durable recovery.
But early failure at 1.16 and a close below the 21-day EMA, currently at 1.1565 risks that, and instead opens the door to consolidation.
Recent price action underlines that GBP is looking better supported now against the EUR following a month of near incessant selling pressures, and August is looking more promising for those looking to sell Sterling and buy the single currency.
July saw further Euro gains that ensure it continues to hold the title as one of 2025's best performing currencies as investors rotated into non-USD alternatives, of which the Euro proved to be the most popular. But the completion of a series of U.S. trade deals means that the cycle is looking stale and due a reversion.
"GBP is starting to look oversold," said Valentin Marinov, head of FX strategy at Crédit Agricole, at the start of the week and ahead of the recent recovery.
We have threfore been witnessing a washout of Euro 'long' bets, aiding the Pound higher in its wake and allowing it to shore up recent support levels.
The extension of the trade becomes more likely if global market volatility stays subdued through August, which would allow the higher-yielding Pound to benefit.
Above: FX market risk sentiment is falling shows the chart from Crédit Agricole, providing conditions which could assist GBP against EUR.
The Pound is considered a high yielder owing to the UK's high interest rates, which tend to attract global flows of capital when market volatility is low, a phenomenon known as the carry trade.
Analysts we follow say the carry trade could become more popular in the coming month as investors wave goodbye to trade uncertainty, which can benefit GBP/EUR and open the door to August gains.
Morgan Stanley thinks Sterling can benefit from the "highest carry-to-volatility in the G10."
"With the next UK CPI not until August 20, that opens up a window for carry-seeking investors to add longs, fueling GBP support," says Morgan Stanley.
The Dollar's charge higher is also playing its role in pacifying a resurgent Euro, with a strong U.S. GDP reading midweek fortifying a subsequent Federal Reserve decision to maintain interest rates at current levels.
Fed Chair Jerome Powell was not forthcoming on whether the Fed would cut again in September, which prompted a paring of market expectations for such a cut, to the benefit of the Dollar.
As the Dollar roars back to life, the Euro is looking to be its biggest victim, which allows GBP/EUR to sneak into the slipstream and recover lost ground.