Insights 
VT 
The EUR/GBP pair experienced an increase, trading near 0.8690, amid ongoing budget concerns in the UK. The decline in Pound Sterling was attributed to the UK’s fiscal challenges, impacting its performance against the Euro.
UK Chancellor Reeves stated no wealth tax hike would occur in the upcoming Autumn Budget, though tax increases and public spending cuts are expected. Bank of England officials highlighted cautiousness in future interest rate adjustments, which may help cushion the GBP’s decline.
French Credit Rating Downgrade
Simultaneously, France’s credit rating was downgraded by S&P Global Ratings from AA- to A+. This downgrade, along with similar reviews from Fitch and DBRS, may affect the EUR’s strength against the GBP.
The Pound Sterling is the UK’s official currency and is the world’s fourth most traded currency, involved in 12% of all foreign exchange transactions. The Bank of England’s monetary policy significantly impacts the Pound, with decisions on interest rates aimed at maintaining steady inflation.
Economic indicators like GDP and trade balance can influence the Pound’s value. A positive trade balance and strong economic data strengthen the currency, while negative outcomes typically result in depreciation.
As of today, October 20, 2025, we see the EUR/GBP cross holding near 0.8700. The primary driver is concern over the UK’s upcoming Autumn Budget, which is causing sterling to weaken against the euro. This situation creates a tense balance, as both currencies face their own distinct headwinds.
UK Budget Concerns
The focus for the pound is squarely on the UK government’s fiscal plans for next week. With Chancellor Reeves ruling out a wealth tax but signaling other tax hikes and spending cuts, uncertainty is high. This fiscal tightening is happening as recent data showed UK public sector net debt was 99.8% of GDP at the end of the second quarter of 2025, constraining the government’s options.
This budget pressure is why we hear cautious language from the Bank of England. Governor Bailey’s comments about “gradual and careful” rate cuts are a response to persistent inflation, which we saw was still at 3.1% in the latest September figures. For traders, this means the BoE is unlikely to rescue the pound with hawkish policy while the government is dealing with the budget.
On the other side of the pair, the euro has its own significant problems. S&P’s recent downgrade of France’s credit rating to A+ is a serious blow, following similar moves by Fitch and DBRS over the past year. This reflects deep-seated worries about the budget and political situation in one of the Eurozone’s core economies.
These concerns are backed by hard numbers, with France’s budget deficit forecast to remain high at 4.8% of GDP for 2025. This, combined with sluggish overall Eurozone growth projected at just 0.2% for the third quarter, caps the euro’s potential strength. We are essentially watching a battle to see which currency is viewed as the least unattractive.
Given these conflicting forces, we expect volatility to increase, especially around next week’s UK budget announcement. A derivatives strategy like buying a straddle could be effective, as it would profit from a sharp move in either direction without needing to predict the outcome. The key is to prepare for a breakout from the current tight range.
The 0.8700 level is the critical pivot point we are watching. A decisive break above this level following the budget could signal a new leg of sterling weakness, while a failure to hold it could see the market’s focus shift back to the Eurozone’s structural issues, pushing the cross lower.
