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EUR/GBP is trading around 0.8800, up 0.40% on Tuesday, influenced by Pound Sterling weakness ahead of the Bank of England’s (BoE) policy meeting. The BoE is expected to maintain its benchmark rate at 4.0%, but a third of market participants anticipate a possible quarter-point cut due to softer inflation data.
UK Chancellor Rachel Reeves expressed concern over the slow reduction of inflation, indicating her budget will focus on addressing this issue. In Europe, ECB President Christine Lagarde’s upcoming speech is not expected to provide new monetary policy guidance. Political tensions in France following the rejection of a wealth tax add to market caution but attention centres on the BoE.
Technical Analysis Of EUR GBP
Technically, EUR/GBP failed to surpass the 0.8818 resistance and dropped below an ascending support line, now resistance near 0.8805. Surpassing this could trigger a retest of 0.8818 and potential bullish movement. Support lies at 0.8790, with a break targeting lows around 0.8763 and further decline aiming at the 100-period SMA near 0.8730.
The pair has been within a 0.8200-0.9300 range since mid-2016, rebounding from the lower bound in February and consolidating near the range’s midpoint. Continued momentum may target the upper bound, but a weekly RSI nearing 70 suggests potential consolidation or pullback.
Looking back, we saw the market debating a potential Bank of England rate cut from 4.0% when EUR/GBP was near 0.8800. That period of uncertainty was pivotal, as the BoE ultimately had to hike rates further to combat the persistent inflation Chancellor Reeves had warned about. Today, with the BoE rate at 5.0% and recent data showing UK Q3 2025 GDP growth at a sluggish 0.1%, the economic cost of that policy is now the market’s primary focus.
Options Strategy And Market Outlook
With the UK economy slowing more sharply than the Eurozone’s, derivative traders should consider buying EUR/GBP call options expiring in early 2026. This strategy positions for a scenario where the BoE is forced to signal rate cuts sooner than the European Central Bank, potentially pushing the pair higher. The defined risk of an options contract is suitable given that the pair is approaching the upper end of its historical range.
Conversely, we must acknowledge the long-term resistance mentioned in the original analysis near 0.9300, a level that has capped gains since the Brexit vote in 2016. Buying protective put options could serve as a valuable hedge against any unexpected positive UK economic news or a surprisingly hawkish BoE stance. This provides a floor for any long positions if the market sentiment toward the Pound suddenly reverses.
Implied volatility is another key area to watch, as the divergence in central bank policy creates uncertainty. The spread between UK and German 2-year bond yields has widened significantly in 2025, reflecting this tension. A long straddle, involving the purchase of both a call and a put option, would allow traders to profit from a large price swing in either direction as markets decide which central bank will pivot first.
