The pound may see new downward trends because UK services inflation might not meet the Bank of England’s expectations. A forecasted inflation rate of 4.6%, which is below the 4.8% average expected, could lead to a softer GBP swap curve, affecting the pound’s value.

UK Services Inflation

Anticipation builds for the November budget, which could present challenges for sterling. Concerns about fiscal health are growing, impacting long-term gilts and the pound’s performance. The possibility of higher taxes could slow growth, making earlier rate cuts by the Bank of England more likely. Bullish predictions are being made for EUR/GBP, with risks pushing towards 0.88 as the budget draws near. The FXStreet Insights Team, made up of journalists, gathers market insights from various experts, including notes and analyses from both internal and external sources. We expect the pound to weaken against the euro in the coming weeks. This outlook is based on two main reasons: expectations of weak inflation data this Wednesday and rising concerns about the upcoming November budget. These factors could pressure the Bank of England to consider rate cuts sooner.

November Budget Insights

The services inflation figure coming out this Wednesday is very important. We expect it to be 4.6%, lower than the Bank of England’s prediction, confirming a cooling trend from the 5.2% reported by ONS for August 2025. Traders may respond by buying short-term put options on GBP, anticipating a dovish market reaction. Looking ahead, the November budget brings significant uncertainty for the pound. Recent figures from the Office for Budget Responsibility show UK debt at 101.5% of GDP. Any signs of fiscal strain or tax increases that could slow growth might heavily impact sterling. This could make longer-term strategies, like buying EUR call options expiring after the budget, wise for capturing potential downside. We recall how sensitive the market was to fiscal news in the fall of 2022 when unfunded plans led to a sharp drop in UK assets. The flow of news and rumors ahead of this year’s budget could lead to similar volatility. This situation makes options appealing for managing the increased event risk. Given these factors, we see EUR/GBP likely heading towards the 0.88 level. Traders might consider buying EUR call options with strike prices around 0.8700 or 0.8750, positioning themselves for this expected move upward in the pair. The combination of falling inflation and fiscal concerns creates a strong case for the pound to decline. Create your live VT Markets account and start trading now.

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