EUR/GBP steadies near 0.8650 as German Industrial Production falls in January

EUR/GBP inches higher after two days of losses, trading around 0.8670 during the European hours on Monday. The currency cross remains stronger following the release of German Factory and Industrial Production data. Eurozone’s Sentix Investor Confidence will be eyed later in the day.

Germany’s Industrial Production fell 0.5% month-over-month (MoM) in January 2026, easing from a downwardly revised 1.0% decline in the previous month but missing expectations of a 0.9% increase. This marked the second straight monthly drop. On a YoY basis, production decreased 1.2% after a revised 0.4% rise in December. Meanwhile, Factory Orders plunged 11% MoM in January, far worse than the expected 4.3% fall, following a previous 7.8% increase.

Markets have been revising interest rate expectations as the inflationary impact of higher energy prices begins to filter through the economy. Concerns that a prolonged Middle East conflict could cause sustained disruption to global growth have also weighed on sentiment.

Rising energy prices are also fueling inflation concerns in the United Kingdom (UK), reducing expectations for a Bank of England (BoE) rate cut this month, with futures markets signaling no further policy changes for the rest of the year.

Meanwhile, UK Prime Minister Keir Starmer reaffirmed his decision not to join the initial US-Israel strikes on Iran, emphasizing diplomacy. Over the weekend, US President Donald Trump dismissed reports that the UK planned to deploy the aircraft carrier HMS Prince of Wales to the Middle East, calling Britain a “once great ally.”