Insights 
VT 
The Euro is losing recent gains after softer UK inflation data, dropping below 0.8700 against the Pound. The EUR/GBP has fluctuated within a 70-pip range since early October. UK inflation in September rose 3.8% year-on-year, lower than the expected 4.0%, increasing speculation about a potential Bank of England rate cut and weakening the Pound.
Technical Analysis
Technically, the EUR/GBP is forming a symmetrical wedge pattern at the 0.8700 level, which could signal a downward trend. Support is between 0.8670 and the October 8 low of 0.8655. Falling below these could lead to the September lows of 0.8635, with a target of 0.8620.
Resistance is between the triangle top at 0.8715 and the 0.8730 area, which has capped gains since early October. Breaking these could push the pair to the yearly high of 0.8750.
A heat map shows the Euro’s strengthened position against the Japanese Yen today. The EUR/GBP remains in a tight range near 0.8700, with possible further downward movements if support levels are breached.
The softer-than-expected UK inflation data from yesterday has shifted our focus significantly. The reading of 3.8% against an expected 4.0% has reinforced the view that the Bank of England may be pressured to cut rates sooner than the European Central Bank. This policy divergence is now the primary driver for a potentially stronger pound against the euro in the coming weeks.
Market Strategy
We are watching the symmetrical wedge pattern forming around the 0.8700 level very closely. Given the fundamental backdrop, this looks like a bearish continuation pattern that could see the pair break lower. A decisive move below the 0.8670 support level would be a key signal for us to increase short positions.
For traders looking to position for this move, buying put options with a strike price around 0.8650 could be an effective strategy. This provides downside exposure while capping the maximum loss if the wedge breaks to the upside instead. We see the measured target for the pattern break at 0.8620, a level not seen since August of this year, 2025.
Conversely, the resistance at 0.8730 has proven to be a strong ceiling for the pair throughout October. Selling out-of-the-money call options above the yearly high of 0.8750 could be a viable strategy to collect premium. This approach benefits from both a drop in the pair and continued range-bound trading.
To add credibility to this view, recent data from the Office for National Statistics showed UK wage growth also cooled to 5.2% in the three months to August 2025, taking pressure off the BoE. Futures markets are now pricing in a 65% probability of a BoE rate cut by March 2026. In contrast, sticky Eurozone core inflation of 3.1% means swaps markets are only pricing a 20% chance of an ECB cut in the same period.
This situation reminds us of the dynamic we saw in late 2023, when markets began to price in the end of the global hiking cycle, leading to significant currency readjustments. The key difference now is the clear divergence opening up between UK and Eurozone monetary policy. The heat map showing the euro’s strength against the yen is a distraction from the core EUR/GBP story developing here.
