UK GDP data suggests the economy ended 2025 on a weak note. Construction activity and business investment both softened. The Bank of England had already concluded that growth slowed late in 2025, based on data from October and November.
Focus now shifts to next week’s UK jobs and inflation releases. Recent numbers have pointed to weaker hiring and a sharp slowdown in wage growth.
Uk Growth Backdrop And Policy Implications
ING expects the Bank of England to cut interest rates in March and again in June. The report connects these expected cuts with a stronger outlook for EUR/GBP.
ING remains bullish on EUR/GBP and sets a short-term target of 0.88. The article also notes it was produced using an AI tool and reviewed by an editor.
The UK economy ended 2025 in a weak position. GDP contracted by 0.1% in the final quarter, which supports our approach. Weakness in construction and business investment has continued into the new year. This strengthens the case that the Bank of England may need to act soon, making a near-term policy shift more likely.
The main driver for EUR/GBP is the widening gap between central bank policy paths. We expect the Bank of England to cut rates in March and again in June to support a sluggish economy. By contrast, Eurozone inflation remains sticky at 2.5%. That makes the European Central Bank more likely to keep rates unchanged for longer.
Proposed Eur Gbp Options Expression
To express this view, we are considering buying EUR/GBP call options expiring in April 2026. This would help us benefit from potential volatility and upside moves around the expected March Bank of England rate cut. A strike near 0.8750 looks reasonable if the pair moves toward the 0.88 target.
Next week’s UK jobs and inflation data will be key. The slowdown in wage growth seen at the end of 2025 needs to continue to strengthen the case for a March cut. The main risk is an unexpectedly high inflation reading, which could delay the Bank’s move and weaken this bullish view.
A similar divergence was seen in 2014–2015. Different policy paths between the two central banks helped drive a sustained trend in the pair. That history supports the idea that the current setup—where the Bank of England is likely to cut before the ECB—could push the cross meaningfully higher.
Create your live VT Markets account and start trading now.
here to set up a live account on VT Markets now
