Insights 
VT 
The EUR/GBP remains above 0.8700 amid France’s unveiling of a new government. The Euro gains strength against the Pound as worries about potential tax hikes in the UK’s Autumn Budget impact Sterling’s performance.
UK Chancellor Rachel Reeves is anticipated to raise taxes in the Autumn Statement to meet fiscal targets, which could slow economic growth. Analysts caution that these actions might affect household sentiment, putting pressure on the GBP and boosting the EUR/GBP exchange rate.
French Government Stability
French President Emmanuel Macron revealed a new government after discussions with Prime Minister Sebastien Lecornu. The absence of plans for dissolving parliament has supported the Euro, with Lecornu’s reassurances easing political instability concerns.
The European Central Bank President, Christine Lagarde, emphasised the importance of France producing a timely budget to achieve international commitments. Political uncertainty could, however, jeopardise the Euro’s position.
The Pound Sterling is heavily influenced by the Bank of England’s monetary policy, with interest rates being a key tool. Economic indicators and trade balance figures also play a role, affecting the currency’s strength.
The Pound Sterling, the world’s fourth most traded currency, is primarily issued by the Bank of England. It is involved in major trading pairs such as GBP/USD and EUR/GBP.
Current Market Dynamics
As of today, October 13, 2025, we see the EUR/GBP cross holding firm above the 0.8700 level, creating a distinct opportunity. This strength in the Euro comes from reduced political anxiety in France, while the Pound is weakening due to fears of tax hikes in the UK’s upcoming Autumn Budget. The market is clearly favouring the Euro over Sterling for the time being.
The bearish case for the Pound is building ahead of the budget statement in late November. We’ve seen recent data from the Office for National Statistics showing UK GDP grew by a mere 0.1% in the third quarter, and inflation remains sticky at 3.1%, well above the Bank of England’s target. This weak growth outlook makes potential tax increases by the government a significant headwind for the Pound.
On the other side, the political situation in France appears to be stabilising, which is a relief for the Euro. Looking back at the market turmoil caused by the snap legislative elections in the summer of 2024, the current period of calm is a notable improvement. This relative stability gives the Euro a stronger foundation compared to the Pound’s uncertain fiscal future.
For derivative traders, this suggests a strategy of buying EUR/GBP call options with expiries in December 2025 or January 2026. This allows us to position for a potential rise in the pair through the UK budget announcement while strictly defining our maximum risk. We should watch tomorrow’s UK employment data closely, as any unexpected strength in the Pound could offer a better entry point for these positions.
