Insights 
VT 
The EUR/GBP pair rises to around 0.8860 on Friday, as concerns about the UK fiscal situation weaken the Pound. UK Prime Minister Keir Starmer and Finance Minister Rachel Reeves have decided against increasing income tax rates, affecting fiscal projections ahead of the November budget.
UK preliminary GDP data fell short of expectations, amplifying financial concerns and influencing the Bank of England (BoE) towards a potential rate cut in December. Market expectations for a 0.25% rate cut by the BoE have surged to a near 80% probability, pressurising the Pound.
Focus On The Eurozone GDP Report
The focus is now on the Eurozone’s third-quarter GDP report, projected to grow by 0.2% QoQ and 1.3% annually. If outcomes are poorer than expected, this might limit the Euro’s gain.
The Pound Sterling, managed by the Bank of England, primarily reacts to monetary policies and economic data, such as GDP and trade balance figures. A strong economy and positive trade balance strengthen the Pound, attracting foreign investment, while weak data can lead to a decline.
Given the current weakness in the Pound, we see the upward trend in EUR/GBP likely continuing. The government’s fiscal U-turn and weak economic data are creating a negative sentiment around Sterling. This suggests a bearish outlook for the Pound against the Euro in the coming weeks.
We note that the UK economy contracted by 0.1% in the third quarter of 2025, confirming fears of a slowdown. This data has solidified market expectations, with pricing now showing an 80% probability of a Bank of England rate cut in December. This policy divergence, with the BoE turning dovish, is a key driver for selling the Pound.
Concerns Of Fiscal Uncertainty
The current fiscal uncertainty is bringing back memories of the market turmoil following the 2022 mini-budget. Foreign investors are growing wary about the UK’s fiscal position, putting pressure on UK government bonds and the currency. The upcoming budget on November 26 is now a major risk event that will keep traders on edge.
For derivative traders, this environment suggests buying call options on EUR/GBP. This strategy allows us to profit from a potential rise in the currency pair while limiting our downside risk to the premium paid. With implied volatility likely to increase ahead of the budget, securing positions now could be advantageous.
However, we must watch today’s Eurozone Q3 GDP figures closely. A weaker-than-expected number, below the forecast 0.2% growth, could cause a temporary dip in EUR/GBP. Such a pullback could present a more favorable entry point to initiate or add to long positions.
Considering Eurostat recently reported that Eurozone core inflation remains sticky at 2.8%, the European Central Bank has less reason to cut rates than the BoE. This strengthens the case for a higher EUR/GBP, with call options struck around the 0.8900 level looking attractive. We will be looking for a sustained break above 0.8860 to confirm this momentum.
