The EUR/GBP pair has risen and is currently trading around 0.8690 due to ongoing budget worries in the UK. The Pound Sterling is weakening because of fiscal issues in the UK, which are affecting its strength against the Euro. UK Chancellor Reeves announced that there will be no wealth tax increase in the upcoming Autumn Budget, but tax hikes and spending cuts are likely. Bank of England officials have expressed caution regarding future interest rate changes, which may help stabilize the Pound.

French Credit Rating Downgrade

At the same time, France’s credit rating has been downgraded by S&P Global Ratings from AA- to A+. This downgrade, along with similar actions from Fitch and DBRS, could weaken the Euro against the GBP. The Pound Sterling is the official currency of the UK and is the fourth most traded currency globally, accounting for 12% of foreign exchange transactions. The Bank of England’s policies significantly affect the Pound, with interest rate decisions aimed at controlling inflation. Economic factors like GDP and trade balance impact the Pound’s value. A positive trade balance and strong economic data tend to boost the currency, while negative data usually causes it to drop. As of today, October 20, 2025, the EUR/GBP pair is steady around 0.8700. Concerns over the UK’s forthcoming Autumn Budget are weakening the Pound against the Euro. This situation is delicate, as both currencies are facing their own challenges.

UK Budget Concerns

Next week, all eyes are on the UK government’s financial plans. Chancellor Reeves has ruled out a wealth tax, but other tax increases and spending cuts are expected, creating uncertainty. Recent data showed that UK public sector net debt was at 99.8% of GDP by the end of Q2 2025, limiting the government’s options. These budget pressures explain the cautious tone from the Bank of England. Governor Bailey mentioned that any future rate cuts would be “gradual and careful,” in response to ongoing inflation, which was still at 3.1% in the latest September figures. For traders, this suggests the Bank is unlikely to adopt a strict policy to support the Pound while the government deals with budget issues. The Euro also faces significant challenges. S&P’s downgrade of France’s credit rating to A+ is a serious issue, following similar actions from Fitch and DBRS in the past year. This highlights ongoing concerns about the budget and political landscape in a key Eurozone economy. The figures back these concerns, with France’s budget deficit expected to be high at 4.8% of GDP for 2025. Combined with sluggish overall Eurozone growth projected at just 0.2% for Q3, this limits the Euro’s potential strength. It’s essentially a contest to see which currency is perceived as less unattractive. Given these conflicting factors, we anticipate increased volatility, especially around next week’s UK budget announcement. A strategy like buying a straddle could be effective, allowing for profits from significant price swings in either direction without needing to guess the outcome. The focus is on preparing for a breakout from the current narrow trading range. The 0.8700 level is crucial. A clear break above this level after the budget could indicate further weakness for the Pound. Conversely, failing to maintain this level could shift attention back to the Eurozone’s issues, potentially pushing the pair lower. Create your live VT Markets account and start trading now.

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