The EUR/GBP rate rose to approximately 0.8690, reflecting hopes of political stabilisation in France. French President Emmanuel Macron’s plan to appoint a new Prime Minister by Friday aims to end the political crisis following Sébastien Lecornu’s resignation.

This appointment has decreased the probability of snap elections to 37%, down from 70%. The Euro found modest support, though uncertainties about parliamentary stability remain. The French: German OAT: Bund spread fell from high-80s to low-80s, offering temporary relief to the Euro.

European Central Bank and Bank of England Policies

The European Central Bank’s meeting minutes are anticipated to show a stable policy stance, with inflation hovering near 2%. The Bank of England’s recent comments advising caution on interest rates have weighed on the British Pound.

BoE officials have spoken about a conservative approach amid high inflation. This has introduced uncertainty into the BoE’s future policy, limiting the GBP’s rebound potential. In this scenario, EUR/GBP maintains slight gains amid French political tensions and BoE policy ambiguity.

The Euro showed varied changes against other major currencies. It was strongest against the New Zealand Dollar with a 0.15% gain but weakest against the British Pound, declining by 0.15%.

Based on the situation we are seeing today, October 9, 2025, the slight rise in EUR/GBP toward 0.8690 is directly tied to hopes of political stability in France. The market is anticipating President Macron’s appointment of a new Prime Minister by Friday, which could calm nerves about the country’s budget process. This presents a short-term opportunity, as the Euro is finding a floor while the Pound remains under pressure.

Key Economic Indicators and Market Strategies

We should pay close attention to the French 10-year government bond (OAT) spread over the German Bund, which has narrowed back to the low-80s basis points. This spread is a key fear gauge, and we saw in 2017 during the French elections how quickly it can tighten once political risk subsides, boosting the Euro. However, with France’s latest budget deficit projection for 2026 just revised by Moody’s to 4.9% of GDP, any disappointment in the new Prime Minister could cause this spread to widen again, making options strategies that hedge against renewed volatility attractive.

On the other side of the pair, the Pound is struggling because of hawkish but uncertain Bank of England commentary. Officials are rightly concerned, as the latest CPI reading for August 2025 in the UK came in at 3.5%, remaining stubbornly above the 2% target. This persistent inflation is why policymakers are signaling that rates will need to stay restrictive for longer, capping any significant strength in the GBP.

This creates a clear policy divergence, with the European Central Bank appearing more comfortable with its current stance. Eurostat’s flash estimate for September 2025 inflation was 2.1%, allowing the ECB to maintain a neutral position while the BoE is forced to sound more aggressive. This fundamental difference supports a steady to stronger EUR/GBP in the medium term.

For the coming weeks, we should consider strategies that benefit from this dynamic, such as buying EUR/GBP call options to position for a potential move above 0.8700 if French political news is positive. One-month implied volatility for the pair has already climbed to 8.2%, reflecting the current uncertainty, suggesting that option premiums are elevated but could rise further if the situation deteriorates. Therefore, using bull call spreads could be a cost-effective way to capture upside while defining our risk.

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