EUR/GBP, the most traded non-USD cross
EUR/GBP is the world's most liquid cross pair (a pair that doesn't include the US dollar). Estimated daily volume: ~$150-180 billion. Sometimes nicknamed "chunnel" (referencing the Channel Tunnel linking both zones), it's heavily traded by European institutions for import-export flows and hedging.
Moderate volatility, typical range
With an average daily range of 40-70 pips, EUR/GBP is one of the least volatile major pairs. This stems from strong economic correlation between the eurozone and UK: 50 % of UK exports go to the EU, and 30 % of UK GDP depends on trade with the bloc. When Europe does well, UK follows (a few months later).
Main drivers
- ECB/BoE rate differential: BoE historically has higher rates than ECB, so GBP stronger. When this premium narrows, EUR/GBP rises.
- UK economic data: CPI, retail sales, GDP. If UK slows faster than Europe → EUR/GBP rises.
- Residual Brexit: bilateral UK-EU post-2020 negotiations (financial services, fisheries, Northern Ireland) can still create 50-100 pip spikes.
- Global Risk-on/Risk-off: pound is "riskier" than euro during global stress phases.
Trading sessions
EUR/GBP is highly active during European session (8am-5pm Paris). It's the only time both markets are open simultaneously (London + Frankfurt). Outside this window, spreads widen and liquidity drops.
Key specifics
Three things specific to this pair: (1) it tends to mean-revert more than USD majors; (2) dividends from large UK and eurozone companies create daily micro-flows; (3) volatility explodes on BoE meeting days (8/year) and ECB days (8/year) — 16 days/year of high risk where spreads can triple.