EUR/GBP is under pressure as the Euro weakens against a strong British Pound, post-UK Autumn Budget. Despite expectations for a Bank of England interest rate cut on 18 December, Sterling remains firm.
EUR/GBP, trading around 0.8729, continues its decline, reaching a third consecutive weekly drop. The pair, down from a November high of 0.8865, has slid below the 21-day and 50-day Simple Moving Averages (SMAs), suggesting a softer trend as selling persists.
Immediate Support and Resistance Levels
It remains above the 100-day SMA at 0.8711, an immediate support area. A drop below this could push the exchange rate to 0.8670-0.8650. Momentum indicators, such as the MACD histogram and RSI, show a bearish trend but remain above oversold levels.
On the upside, the 50-day SMA at 0.8751 poses the first barrier, followed by the 21-day SMA at 0.8787. Surpassing these could revive bullish momentum, aiming for the 0.8865 high.
In currency markets, the British Pound strengthens most against the Japanese Yen. The heat map shows percentage changes of major currencies against each other, with the Pound recording gains over the Dollar, Euro and Yen.
Given the persistent downward pressure on EUR/GBP, we see the trend as our primary guide heading into the mid-December Bank of England meeting. The Euro continues to be sold off due to a notable policy divergence, with the European Central Bank signaling more aggressive easing compared to the BoE. The Pound’s strength is holding firm, suggesting the market has already priced in the expected BoE rate cut on December 18.
Investment Strategies for Bearish Outlook
Recent data reinforces this view, making the Pound the more attractive currency of the two. We just saw November’s UK inflation data come in at 3.1%, which is still stubbornly above the BoE’s 2% target, limiting how much they can signal further cuts. In contrast, the latest Eurozone flash CPI estimate for November 2025 was softer at 2.5%, giving the ECB a clearer path to lower rates and weighing on the Euro.
For those anticipating a further slide, purchasing put options with a January 2026 expiry seems prudent. A strike price around 0.8650 would capitalize on a break of the key 0.8711 support zone, a move that appears increasingly likely. This strategy offers a defined-risk way to profit from continued downward momentum following the BoE’s decision.
A more conservative approach would be to establish a bear put spread. By buying a 0.8700 put and simultaneously selling a 0.8650 put, traders can lower the upfront cost of the position. This is ideal if we expect a modest, controlled decline toward the 0.8650-0.8670 area rather than a sharp collapse.
We must also watch the 100-day moving average at 0.8711, as a failure to break below this level could frustrate sellers. If the pair holds support, selling out-of-the-money call options or implementing a bear call spread with a strike above the 0.8787 resistance could be a viable strategy to collect premium. This position would benefit from the price either falling or moving sideways in the coming weeks.
Looking back, the BoE’s aggressive fight against the high inflation we saw through 2023 and 2024 has given Sterling a degree of credibility that the Euro currently lacks. This historical context supports the fundamental picture of a stronger Pound, even as the central bank prepares to trim rates. The market seems to believe the UK’s economic footing is simply more solid than the Eurozone’s right now.
