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    Modest support for GBP after less-dovish BoE message, while EUR/GBP stays around 0.87

    by VT Markets
    /
    Dec 19, 2025
    The Pound Sterling received some support after the Bank of England’s less dovish message than expected. Many officials are worried about continued high wage growth expectations and persistent inflation. Experts predict that these wage expectations might drop in the New Year as general inflation decreases. There could be 25 basis point rate cuts in February and April, rather than just one cut as the market expects. This may keep the EUR/GBP around 0.87.

    Bank Of England Concerns

    The Bank of England remains worried about high wage growth, which temporarily strengthened the pound. However, recent data from late November 2025 shows UK headline inflation fell unexpectedly to 3.1%. This significant drop indicates that price pressures are easing, challenging the Bank’s less-dovish stance. Recent economic data shows a slowdown, with November’s retail sales dropping by 0.4% as consumers cut back on spending. This combination of falling inflation and weaker activity suggests that rate cuts may happen sooner than expected. History indicates that when data shifts like this, the Bank of England often has to change its hawkish tone quickly. We believe rate cuts of 25 basis points are likely in both February and April 2026. The current market only anticipates one cut during that time, creating a clear opportunity for traders. This difference in expectations may put further downward pressure on the Pound in the upcoming weeks.

    Forex Trading Outlook

    For foreign exchange traders, this outlook should provide solid support for the EUR/GBP pair at the 0.8700 level. A more dovish Bank of England may weaken the Pound against the Euro, allowing the pair to rise into the new year. We expect this level to maintain strong support. In the derivatives market, this suggests preparing for a weaker Pound, especially as we approach January 2026. Buying call options on EUR/GBP with February or March expirations might be a cost-effective way to trade this perspective. This strategy allows traders to benefit from a potential rise while limiting their risk if wage data stays unexpectedly high. Create your live VT Markets account and start trading now.

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