The EUR/GBP pair rose to nearly 0.8835 during early European trading, influenced by a weaker British Pound after disappointing UK GDP data. In the third quarter of 2025, the UK GDP grew by only 0.1% QoQ, falling short of the previous 0.3% and below the expected 0.2%. Year-over-year, the GDP expanded by 1.3%, compared to an expected 1.4%. The UK’s economic outlook worsened with a GDP monthly reading of -0.1% for September, which was below the 0% forecast, following a previous 0% in August. In contrast, the European Central Bank (ECB) is taking a cautious approach, which supports the Euro as they highlight ongoing inflation pressures. These factors significantly influence currency values, including the British Pound. The Bank of England adjusts interest rates to maintain price stability, which can either curb inflation or encourage growth, impacting the GBP’s attractiveness globally.

Role Of Economic Indicators

Economic indicators like GDP and Trade Balance are important in determining currency value by reflecting economic strength and attracting foreign investment. A strong Trade Balance, driven by high export demand, enhances currency strength. The UK’s weak Q3 GDP growth of just 0.1% represents a notable economic slowdown, particularly with the decline in September’s monthly figure. This trend suggests the Bank of England may need to implement supportive monetary policies sooner than expected, creating a clear difference from the European Central Bank, which is focused on persistent inflation in services. We’ve seen similar patterns in the past, especially during the UK’s economic stagnation in the second half of 2023, when growth was low and the Bank of England adopted a dovish tone in comparison to other central banks. This historical context reinforces the expectation of continued underperformance of the Pound Sterling in the near future. With this perspective, it may be wise to consider strategies that benefit from a rising EUR/GBP exchange rate. Buying call options on EUR/GBP with expirations in early 2026 could allow for potential gains while keeping risk limited. A target strike price above 0.8900 seems reasonable, especially if upcoming UK inflation data shows signs of declining more rapidly than in the Eurozone.

ECB’s Focus On Core Inflation

The ECB’s attention to core inflation is not new; in late 2023, core CPI in the Eurozone remained stubbornly above 4% even as overall inflation fell. Current Eurostat data indicates that core inflation in the Eurozone is around 3.1%, still exceeding the ECB’s target and justifying their cautious approach. This ongoing inflation supports the Euro against a weakening Pound. Over the coming weeks, it is essential to monitor the UK’s November inflation report and the preliminary PMI data for both economies. Any additional signs of weakness in the UK, particularly in the services sector, could further push up the EUR/GBP exchange rate. The upcoming December meetings for both the Bank of England and the ECB will be key in confirming this policy divergence. Create your live VT Markets account and start trading now.

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