**Market Predictions for Bank of England** On Friday, during the North American session, the EUR/GBP currency pair hit a four-week high of 0.8744, rising by 0.74%. This increase came as the Bank of England’s cautious outlook overshadowed strong UK retail sales, which grew by 1.5% year-on-year in September. This was well above the predicted 0.6%. UK core sales, excluding petrol, rose by 2.3% year-on-year, also exceeding expectations of 0.7%. Additionally, business activity showed improvement, as indicated by S&P Global’s Flash PMIs. In the Eurozone, the HCOB Manufacturing and Services Flash PMI for October indicated growth in business activity and demand. Market expectations that the Bank of England will reduce interest rates by the end of the year have risen to 65%, up from 49% just two days prior. However, this is down from a peak of 75% on Thursday. Looking at the technical side for EUR/GBP, the trend is neutral to upward, but the pair has not yet broken the high of 0.8757 set in 2025. The Euro has strengthened against many major currencies, including a 1.01% increase against the GBP, while the Yen showed the most weakness against the Euro. **Market Sentiments and Strategy** The rise of the EUR/GBP pair to a four-week high reflects traders’ belief that the Bank of England (BoE) may cut interest rates soon. This strong sentiment persists despite recent UK retail sales surpassing forecasts. The latest UK inflation data for September, which dropped to 2.9%, has reinforced the market’s expectation of an upcoming rate cut before the year ends. Meanwhile, the Euro is gaining strength as the Eurozone economy improves, with business activity increasing more than anticipated. This creates a noticeable contrast; while the BoE leans towards easing policy, the European Central Bank is focused on core inflation rates still above 3%. Germany’s Ifo Business Climate index, which rose for a third straight month to 91.5, further supports the Euro’s strength. In the weeks ahead, consider buying call options on EUR/GBP, especially if the price convincingly breaks above this year’s high of 0.8757. A move past this barrier could push the price towards the 0.8800 level. Increasing expectations about differing actions from central banks are likely to heighten volatility, making long options an attractive strategy. For a more structured approach, a bull call spread would help manage costs while seizing the anticipated upward movement. We could aim for the 0.8835 resistance level, a peak we’ve not seen since May 2023. This strategy allows us to benefit from a moderate rise in the pair while minimizing the initial premium expense. Create your live VT Markets account and start trading now.

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