The EUR/GBP rose to about 0.8775 as Monday’s early European session began. Concerns over the UK budget hurt the GBP, with political challenges faced by UK Finance Minister Rachel Reeves affecting its value against the Euro. The Bank of England (BoE) is expected to keep interest rates at 4.0% when it announces its decision this Thursday. Concerns about UK fiscal risks tie to Chancellor Reeves’s autumn budget. Potential tax increases and slow economic growth are contributing to the GBP’s decline against the EUR. Analysts predict that while the BoE will maintain current rates, future tax hikes could lead to a rate cut to 3.75%. The European Central Bank has kept its deposit rate at 2.0% but is ready to take action if needed.

French Economic Uncertainty

The French government plans private discussions with lawmakers to avoid political disruptions seen in past budgets. Economic uncertainty in France may weaken the EUR against the GBP. The Pound Sterling is the oldest currency and plays a significant role in foreign exchange, trading in pairs like GBP/USD, GBP/JPY, and EUR/GBP. The BoE adjusts interest rates to control inflation, which affects the GBP’s value. Key economic indicators like GDP and trade balance also influence the GBP’s market standing. The EUR/GBP pair is gaining strength, nearing the 0.8800 level as November 2025 begins. This increase is mainly due to worries about the UK’s upcoming Autumn Statement from Chancellor Reeves. Traders are preparing for the possibility of higher taxes, which could further hurt the UK’s sluggish economic growth, as Q3 2025 figures showed only a 0.1% increase. This Thursday’s BoE meeting is highly anticipated, though no change from the current 4.0% interest rate is expected. The BoE faces challenges, with October’s inflation at 3.1% and almost no growth reported. In contrast, the European Central Bank appears satisfied maintaining its rate at 2.0%, as recent data shows Eurozone inflation has dropped to 2.4%.

Market Positioning Ahead of UK Budget

In the derivatives market, we see a setup that suggests further GBP weakness against the EUR. The one-month implied volatility for EUR/GBP has increased to 7.8%, reflecting market nervousness ahead of the budget announcement scheduled for November 26th. Buying EUR/GBP call options could be a defined-risk strategy to take advantage of potential gains if Sterling faces more pressure. We all recognize how UK fiscal events can influence markets, especially after the significant Sterling drop following the 2022 “mini-budget.” However, the biggest risk to a stronger EUR/GBP is political instability in France, where the government is struggling to pass its own budget. If the government collapses, it could quickly weaken the Euro and reverse the pair’s recent gains. Create your live VT Markets account and start trading now.

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