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    Chris Turner notes GBP/INGEUR dropping below 0.88, despite strong demand for GBP/USD above 1.31

    by VT Markets
    /
    Nov 10, 2025
    EUR/GBP has dropped below 0.88 again, while GBP/USD sees demand stay above 1.31. Many believe the chance of a 25 basis point rate cut by the Bank of England in December is being underestimated. Currently, market predictions show a 60% possibility for this cut. We expect September wage data to slow down, which could boost the Bank of England’s confidence that inflation is becoming less persistent. This data may impact their decisions on monetary policy. If EUR/GBP goes down to 0.8750/60, strong demand is likely at that level. Right now, levels above 0.88 are preferred.

    Looking Back At Interest Rate Cuts

    Looking back, many thought the pound would weaken because the market didn’t fully recognize the possibility of a Bank of England rate cut. This belief was based on expectations that wage data from September 2025 would show a slowdown, giving the central bank a reason to act. This was confirmed when the October data showed wage growth drop from 5.8% to 5.2%. This belief was supported when the Bank of England cut its key interest rate by 25 basis points later in 2025, pushing EUR/GBP towards the 0.8900 level. Since then, we’ve seen UK inflation decrease further, with the latest figures showing the Consumer Price Index at 2.8%, moving closer to the Bank’s 2% target. This indicates that inflationary concerns from 2023 and 2024 are easing more quickly.

    Market Predictions For 2026

    Now, the focus is on the likelihood of more rate cuts in early 2026, as the UK economy shows signs of slowing. Derivative markets are currently pricing in nearly a 70% chance of another rate cut by the end of the first quarter. This suggests that the most likely direction for the pound remains downward against the euro. In the coming weeks, we see value in positioning for continued weakness in sterling, especially as the narrative of more rate cuts strengthens. Derivative traders may consider buying EUR/GBP call options with a strike price around 0.8950 for a January 2026 expiry. This approach offers defined risk while capturing potential gains if the pair continues to rise due to differing central bank policies. Create your live VT Markets account and start trading now.

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