Insights 
VT 
Market Predictions for Bank of England
During the North American session on Friday, EUR/GBP reached a four-week high of 0.8744, rising by 0.74%. This occurred as the Bank of England’s dovish outlook countered strong UK retail sales, which increased by 1.5% year-on-year in September, exceeding the 0.6% forecast.
UK Core sales, excluding petrol, grew by 2.3% year-on-year, outperforming expectations of 0.7%. Business activity also improved, according to S&P Global’s Flash PMIs. In the Eurozone, the HCOB Manufacturing and Services Flash PMI for October showed an increase, suggesting a rise in business activity and demand.
Market bets are that the Bank of England will cut rates by the end of the year have increased to 65%, up from 49% two days ago. However, it fell from a high of 75% on Thursday.
In terms of EUR/GBP’s technical outlook, it remains on a neutral to upward path but has not surpassed the 2025 high of 0.8757. The Euro strengthened against several major currencies, including a 1.01% rise against the GBP, while the Yen showed the most weakness against the Euro.
Market Sentiments and Strategy
We are seeing the EUR/GBP pair climb to a four-week high because traders believe the Bank of England (BoE) is about to cut interest rates. This sentiment is strong, even with recent UK retail sales beating expectations. The latest UK inflation figures for September 2025, which showed a drop to 2.9%, have solidified the market’s view that a rate cut is coming before the end of the year.
Meanwhile, the Euro is showing its own strength as the Eurozone economy improves, with business activity picking up more than forecasted. This creates a clear divergence, as we see the BoE leaning towards easing policy while the European Central Bank remains focused on a core inflation rate still above 3%. Germany’s Ifo Business Climate index, which recently rose for a third consecutive month to 91.5, further supports the case for a stronger Euro.
In the coming weeks, we should look at buying call options on EUR/GBP, particularly if the price breaks convincingly above the year’s high of 0.8757. A move past this resistance could spark a quick run towards the 0.8800 level. Rising expectations of differing central bank actions will likely increase volatility, making long options a good strategy.
For a more defined trade, a bull call spread could manage costs while capturing the expected upward move. We could target the 0.8835 resistance level, a peak we haven’t seen since May of 2023. This strategy allows us to profit from a moderate rise in the pair while limiting our initial premium outlay.
