EUR/GBP stayed in a tight range near 0.8710 on Wednesday. The Pound held firm after UK data, while broad US Dollar weakness drove wider FX moves.
UK ONS data showed monthly GDP rose 0.1% in December, in line with forecasts. This came after 0.2% growth in November, which was revised down from 0.3%.
Early estimates showed Q4 GDP grew 0.1% QoQ. That missed the 0.2% forecast and matched the previous quarter. Annual growth slowed to 1.0% in Q4 from 1.2%, also below expectations.
These results sharpened market focus on the Bank of England outlook. Markets are now pricing in a possible rate cut as soon as March.
Attention now shifts to Eurozone preliminary GDP on Friday. Forecasts look for 0.3% QoQ growth in Q4, unchanged from the prior reading. Annual GDP is expected at 1.3% YoY, down from 1.4%.
A Reuters poll from 9–12 February found that 66 of 74 economists expect the ECB deposit rate to hold at 2.00% through 2026. The poll suggests no change before 2027.
Our key theme is the widening gap between the Bank of England and the European Central Bank. Even though the market is calm near 0.8710, low volatility can offer a chance to position for a move. This policy gap is likely to be the main driver of EUR/GBP in the coming weeks.
UK data continues to point to slower growth. This supports our view that the Bank of England will cut rates soon. January 2026 inflation fell to 2.1%, below the BoE’s target and adding weight to the case for a March cut. Futures markets now price a 75% chance of a 25-basis-point cut next month.
By contrast, the Eurozone looks more steady. That supports the ECB’s decision to keep rates at 2.00%. German industrial production for December 2025 beat expectations, rising 0.5%. This suggests the region’s main growth engine is holding up. That stability makes the Euro more appealing than a weakening Pound.
We saw a similar policy split in 2024. Then, the ECB paused hikes while the BoE signaled one more increase. EUR/GBP drifted lower, showing how closely markets follow central-bank signals. Today, the setup looks reversed, which could now favor the Euro.
Given this view, buying EUR/GBP call options looks like a sensible way to benefit from a potential move higher. An April expiry with a strike near 0.8800 provides exposure to the expected trend while limiting downside risk. This structure can gain from both a higher spot rate and any rise in volatility.
The main risk is that Friday’s Eurozone GDP misses forecasts and briefly weakens the Euro. We should also watch for hawkish comments from BoE officials that push back against rate-cut pricing. Still, with weak UK data through late 2025, any Pound strength may not last long.
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