Insights 
VT 
The EUR/GBP currency pair has declined, ending its three-day rise to a nearly one-month high. The different expectations for the Bank of England (BoE) and European Central Bank (ECB) act as a supportive factor for this currency pair. Traders are cautious about making strong directional bets before the ECB meeting on Thursday.
The pair is currently trading around 0.8730-0.8725, moving away from the 0.8745-0.8750 zone reached on Friday. The British Pound faces challenges from expectations of further BoE easing and concerns over the UK’s fiscal outlook. The BoE is anticipated to cut interest rates by 25 basis points in November.
This contrasts with the belief that the ECB has finished reducing rates. Rate futures suggest a 25bps cut by end-2026, potentially boosting the Euro against the Pound. However, political uncertainties in France might deter strong bullish bets on the Euro.
France’s Socialist Party leader has threatened government action unless budget demands are met. Moody’s Ratings adjusted France’s outlook to negative due to political instability affecting key policy challenges. Traders await the ECB’s decision before making moves on the EUR/GBP.
On Monday, October 27, 2025, we are seeing EUR/GBP pull back slightly from the one-month high it reached last Friday near the 0.8750 level. This pause seems temporary as traders are hesitant to take strong positions before the European Central Bank (ECB) meeting this Thursday. The underlying trend still appears to favour a stronger euro against the pound.
The fundamental driver is the growing policy split between the Bank of England (BoE) and the ECB. Recent data from earlier in October 2025 showed UK wage growth slowing and the unemployment rate edging up to 4.3%, strengthening our belief that the BoE will cut rates by 25 basis points in November. This contrasts sharply with the ECB, which is expected to hold rates steady for the foreseeable future.
Looking at the Eurozone, the ECB has little reason to consider cutting rates just yet. While headline inflation has moderated, Eurostat’s latest flash estimate for October 2025 showed core inflation, which excludes volatile items, remaining stubbornly above 3.5%. This stickiness supports the view that the ECB’s rate-cutting cycle is finished for now, providing a solid floor for the euro.
For traders, this suggests a strategy of buying dips in EUR/GBP, with an eye on a break above the 0.8750 resistance. Given the upcoming event risk from the ECB meeting, using derivatives like call options could be prudent. This would allow participation in any potential upside rally while limiting downside risk should the ECB deliver a surprisingly dovish message.
We’ve seen this type of policy divergence drive the currency pair significantly in the past. Looking back to the 2016-2018 period, differing monetary policies between the UK and the Eurozone caused EUR/GBP to rally substantially. If the BoE proceeds with cuts while the ECB holds, a similar, though perhaps less dramatic, upward trend could establish itself through the end of 2025.
However, we are keeping a close watch on political developments in France, as this remains the main risk to a stronger euro. With France’s public debt now exceeding 112% of its GDP, Moody’s recent negative outlook could weigh on the currency if the government’s stability is threatened. This, along with the UK’s Autumn budget statement in November, are key factors that could introduce volatility.
