UK GDP data showed the economy ended 2025 weakly, with softer construction activity and business investment. The Bank of England had already assessed that growth slowed towards the end of 2025, based on earlier data for October and November.<\/p>\n
Attention is now on next week\u2019s UK jobs and inflation releases. Recent data has pointed to weaker hiring and a sharp slowdown in wage growth.<\/p>\n
ING expects the Bank of England to cut interest rates in March and again in June. The report links these expected cuts to a firmer EUR\/GBP outlook.<\/p>\n
ING keeps a bullish view on EUR\/GBP and sets a short-term target of 0.88. The article notes it was produced using an AI tool and checked by an editor.<\/p>\n
The UK economy’s weak performance at the end of 2025, marked by a final quarter contraction of 0.1%, sets the stage for our strategy. Softness in the construction and business investment sectors has carried over into the new year, reinforcing the view that the Bank of England must act soon. This weak footing makes a policy shift more likely in the near term.<\/p>\n
The key driver for this currency pair is the growing difference in central bank policy. We expect the Bank of England to cut rates in March, and again in June, to support the sluggish economy. In contrast, recent Eurozone inflation data came in at a stubborn 2.5%, making the European Central Bank more likely to hold its rates steady for longer.<\/p>\n
To trade this view, we are considering buying EUR\/GBP call options with an April 2026 expiry. This allows us to capture the expected volatility and upward price movement around the anticipated March rate cut from the Bank of England. A strike price near 0.8750 seems reasonable to position for a move towards the 0.88 target.<\/p>\n
Next week’s UK jobs and inflation data will be critical. The sharp slowdown in wage growth we saw at the end of 2025 needs to continue to cement the case for a rate cut in March. An unexpectedly high inflation reading is the primary risk that could delay the Bank’s action and challenge this bullish outlook.<\/p>\n
We saw a similar divergence play out in 2014-2015, where differing policy paths between the two central banks created a sustained trend in the pair. That historical precedent supports the idea that the current setup, with the Bank of England poised to cut rates before the ECB, can drive the cross significantly higher.<\/p>\n
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