The Euro is steady around 0.8800 after the European Central Bank (ECB) decided to keep interest rates unchanged. Positive growth data from the Eurozone is supporting the currency, while the Pound Sterling is struggling due to negative economic outlooks in the UK. The ECB kept its refinancing rate at 2.15% and noted that inflation is close to its target. ECB President Christine Lagarde spoke about global issues, such as geopolitical tensions and trade uncertainties, while also acknowledging ongoing economic challenges in the Eurozone.

German Consumer Inflation Update

In Germany, consumer inflation slowed to 2.3% in October, down from 2.4% in September, which is slightly above expectations. Meanwhile, the UK’s Office for Budget Responsibility revised down productivity forecasts, which could widen the fiscal gap by £20 billion. This suggests that the Bank of England might cut rates. Markets see a 68% chance of a 25-basis point rate cut in December. The Euro is showing different percentage changes against major currencies, performing best against the Japanese Yen. This data provides a snapshot of major currency exchanges. The disparity between the European Central Bank and the Bank of England indicates clear trends for the upcoming weeks. The latest Eurozone flash Composite PMI for October was 51.2, signaling steady growth and contrasting sharply with the UK’s outlook. This supports strategies like buying EUR/GBP call options with strike prices just above the current 0.8800 level. The cut in UK productivity forecasts is significant. Recent data from the Office for National Statistics (ONS) showed only a 0.2% growth in output per hour during the third quarter of 2025. This reinforces the idea that the Bank of England is likely to cut rates, a view supported by a 7-2 split in the minutes from the last meeting. We believe that investing in GBP volatility through options could also yield benefits ahead of the November 26 budget.

ECB Rate Decision and Its Impact

The ECB’s choice to maintain rates is backed by strong data. While German headline inflation has dipped to 2.3%, we’re keeping an eye on the more stubborn core inflation rate, which remains at 2.8%. This factor limits the central bank’s reasons to consider easing. The stability in policy makes short-term Euro futures appealing against the Pound. Currently, the EUR/GBP exchange rate is testing a key resistance level near 0.8800, a point we haven’t broken since the market disruptions of late 2022. If we can hold above this level, we may see further gains, potentially pushing towards 0.8900 in the coming weeks. Therefore, preparing bullish positions before a possible breakout seems sensible. Create your live VT Markets account and start trading now.

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