Sterling reached a 22-month high against the Euro this month, but since then, its performance has weakened, and the GBP/EUR exchange rate has dropped to around 1.1820, where it stands at the start of this week.

There are no major data releases expected from the Eurozone this week, leading us to anticipate a gentle pullback and consolidation. It wouldn’t be surprising to see the rate test 1.18. Nevertheless, the Pound is still in a broader uptrend, with key technical indicators remaining supportive, suggesting that any weakness should be limited.

This outlook is influenced by political risks impacting the Euro, particularly due to the French legislative elections. Forward-looking financial products indicate potential volatility during the election period, with polls suggesting a 'hung' parliament. This scenario, while not the worst, is less than ideal for France, given its significant debt and investor concerns about the country's financial outlook.

Meanwhile, GBP/USD is trading near 1.2650 in the European morning on Monday. The policy divergence between the Bank of England and the Federal Reserve undermines the pair, while a stable risk tone limits any downside. The focus now shifts to speeches from Fed policymakers, with the UK and US data calendar being relatively quiet.

Last Thursday, GBP/USD dropped by 0.5% and continued to decline during the early European session on Friday, touching its lowest level since mid-May at 1.2630 before edging higher to the 1.2650 area. The technical outlook does not indicate a strong recovery momentum.

Looking ahead to the weekend, market participants will watch the latest US and UK GDP numbers, released Thursday and Friday respectively. Both the annualised and quarterly print for the UK are expected to show significant improvement versus the previous print, with YoY reversing into the green at 0.2 percent. Meanwhile the quarterly figure should rebound to an impressive 0.6 percent.