The EUR/GBP exchange rate remains strong, staying above 0.8700 as political issues in France calm down. The Euro is strengthening against the Pound Sterling after the French government survived no-confidence votes. People are looking forward to upcoming speeches from Bank of England officials, Huw Pill and Megan Greene.

French Political Stability and Economic Indicators

French Prime Minister Sebastien Lecornu successfully navigated two no-confidence votes, reducing political turmoil in France and boosting the Euro. At the same time, the Pound is supported by early signs of recovery in the UK manufacturing sector and slight GDP growth. The upcoming Autumn Budget may include tax increases. In August, the UK’s economy grew by 0.1% compared to the previous month, matching predictions after a previous contraction of 0.1%. Industrial Production improved by 0.4%, exceeding expectations. The Euro, which is widely used, accounted for 31% of foreign exchange transactions in 2022. The European Central Bank (ECB) affects the Euro’s value by adjusting interest rates. Important economic metrics like inflation and GDP data from leading Eurozone economies, such as Germany and France, guide policy decisions and influence currency strength. A positive Trade Balance helps increase currency value by attracting foreign investment. Earlier in late 2023, EUR/GBP found support above 0.8700, as political issues in France lessened. That risk has faded from memory, and the focus has shifted back to differences in central bank policies.

ECB and Bank of England Policy Divergence

The Euro is supported by a European Central Bank that is still concerned about inflation. The Eurozone’s Harmonized Index of Consumer Prices (HICP) for September 2025 was a steady 2.8%, preventing the ECB from considering rate cuts. This is different from two years ago when global rate hikes were common. On the other hand, the UK’s economic situation is changing, as tax increases from the budgets of 2023 and 2024 have slowed down consumer spending. The latest UK Consumer Price Index (CPI) for September 2025 dropped to 2.5%, getting closer to the Bank of England’s target. This has caused some members of the Monetary Policy Committee to discuss when to consider future rate cuts. For derivative traders, this increasing divergence suggests positioning for more strength in EUR/GBP. The ECB’s strong position contrasts with the Bank of England’s softer outlook, creating upward pressure on the currency pair. We recommend buying call options with strike prices around 0.8750 in the coming months as a low-risk way to benefit from this trend. Moving forward, traders should pay attention to the upcoming flash Manufacturing and Services PMI data for October 2025. If UK economic activity shows more signs of slowing while the Eurozone stays strong, it will strengthen the case for a weaker Pound. This could push the EUR/GBP exchange rate beyond resistance levels observed this year. Create your live VT Markets account and start trading now.

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