EUR/GBP is stable around 0.8825 in early European trading on Monday. Weak UK GDP data is putting pressure on the Bank of England (BoE) to make a move. In contrast, European Central Bank (ECB) policymaker Mārtiņš Kazāks stated that there’s no need to change interest rates. The UK economy grew only 0.1% in Q3 of 2025, missing expectations. Year-over-year GDP growth was 1.3%, below the forecast of 1.4%. This could lead the BoE to lower rates, with interest-rate swaps showing a 79% chance of a 25-basis point cut in December.

Potential Impact On Currency

Concerns about the UK’s fiscal debt and rate cut expectations may weaken the Pound Sterling against the Euro. While the BoE could lower rates, the ECB remains cautious, which may help support the Euro against the GBP. The Pound Sterling, shaped by the BoE’s policies, is significantly affected by economic data like GDP and trade balance figures. A strong economy can bolster the Sterling by attracting foreign investment, while weak data usually weakens it. Lallalit Srijandorn, a digital entrepreneur in Paris and Bangkok, wrote this analysis. There is a clear divide in policies between the Bank of England and the European Central Bank. With UK growth at just 0.1% last quarter, the market is heavily betting on a BoE rate cut next month. This was backed by last week’s data showing UK inflation fell sharply to 2.1% in October 2025, much closer to the BoE’s target.

Trading Insights

This suggests positioning for a higher EUR/GBP exchange rate in the coming weeks, aiming towards 0.8900. Buying call options with strike prices near 0.8900 or 0.8950, expiring after the BoE meeting on December 18th, could be a good way to trade this expected weakness of the sterling. Implied volatility on these options may increase as the meeting date approaches. We have seen similar situations in the past, especially after the 2016 Brexit vote. The BoE’s monetary easing then, compared to the ECB’s approach, pushed EUR/GBP from below 0.75 to above 0.90. While the scale of this move may vary, the main reason for the policy difference remains unchanged. In the Eurozone, inflation is more stubborn. The latest Harmonised Index of Consumer Prices (HICP) is at 2.7%, justifying the ECB’s cautious hold. Meanwhile, the most recent UK retail sales figures showed an unexpected 0.5% drop in October, indicating a weak start to the fourth quarter. This mix of weak UK consumption and steady Eurozone inflation supports a rising EUR/GBP. We should also pay attention to comments from BoE officials like Catherine Mann later today for any clues about their voting intentions. Additionally, the upcoming UK Autumn Statement on November 26th will be crucial, as any announcements of fiscal tightening could dampen UK growth further. A surprisingly hawkish tone from Mann could briefly support the pound, but overall economic data points toward weakness. Create your live VT Markets account and start trading now.

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