Insights 
VT 
The EUR/GBP increased to approximately 0.8775 as the early European session started on Monday. Concerns about the UK budget impacted the GBP, with political pressures on UK Finance Minister Rachel Reeves affecting the currency’s value against the Euro. The Bank of England’s (BoE) decision on interest rates, expected to remain at 4.0%, is anticipated this Thursday.
UK fiscal risk worries relate to Chancellor Rachel Reeves’s autumn budget, with potential tax hikes and slow economic growth lowering the GBP’s value against the EUR. Analysts expect the BoE to maintain current rates, but looming tax increases may prompt a future rate cut to 3.75%. The European Central Bank, having kept its deposit rate at 2.0%, claims readiness to act if necessary.
French Economic Uncertainty
The French government plans closed-door talks with lawmakers to avoid past budget-related political disruptions. Economic uncertainty in France could weaken the EUR against the GBP. The Pound Sterling is the oldest currency, a major player in foreign exchange, noted for pairs like GBP/USD, GBP/JPY, and EUR/GBP. The BoE uses interest rate adjustments to manage inflation, impacting GBP value. Economic indicators like GDP and trade balance also influence GBP’s market position.
The EUR/GBP pair is showing strength, climbing towards the 0.8800 level as we begin November 2025. This move is largely driven by nervousness surrounding the UK’s upcoming Autumn Statement from Chancellor Rachel Reeves. We see traders pricing in the risk of higher taxes, which could further dampen the UK’s already sluggish economic growth, as Q3 2025 figures showed a mere 0.1% expansion.
This Thursday’s Bank of England meeting is the main event, though we don’t expect a change from the current 4.0% rate. The BoE is in a tough spot, with October’s inflation data still high at 3.1% while growth remains nearly flat. This contrasts sharply with the European Central Bank, which seems content holding its rate at 2.0% as the latest flash estimate showed Eurozone inflation has fallen to 2.4%.
Market Positioning Ahead of UK Budget
For us in the derivatives market, this setup suggests positioning for further GBP weakness against the EUR. One-month implied volatility for EUR/GBP has already climbed to 7.8%, reflecting the market’s anxiety ahead of the budget announcement now scheduled for November 26th. Buying EUR/GBP call options could be a defined-risk way to play potential upside if Sterling comes under further pressure.
We are all mindful of how UK fiscal events can move markets, especially after the major Sterling sell-off following the 2022 “mini-budget”. However, the main risk to a higher EUR/GBP is political instability in France, where the government is struggling to pass its own budget. A government collapse there could quickly weaken the Euro and reverse the pair’s recent gains.
