The European Central Bank (ECB) is expected to keep interest rates steady. With recent positive data on economic activity, wages, and inflation in the eurozone, short-term rates are likely to rise. Meanwhile, the Bank of England continues to lower its rates, which may lead the EUR/GBP exchange rate to climb toward 0.9000 next year. The ECB is not likely to change its rates and seems confident in its current policies. Recent strong data has reduced expectations for rate cuts in the near future, supporting a rise in short-term eurozone rates and strengthening the euro.

ECB To Suggest Improved Growth Forecasts

ECB President Christine Lagarde mentioned that growth forecasts might be upgraded soon. The ECB isn’t too worried about weaker PMI data in the eurozone for December. With steady ECB rates and ongoing cuts by the Bank of England, we expect the EUR/GBP rate to rise toward 0.9000 next year. This information is provided by the FXStreet Insights Team, which gathers analysis from various market experts. The European Central Bank is likely to keep interest rates steady today, showing that their policy is stable. Recent economic numbers have been unexpectedly strong, leading to fewer expectations for any rate cuts soon. For example, Eurostat reported November 2025 inflation at 2.4%, while negotiated wage growth reached 4.5% in the third quarter. There is a clear difference in central bank policies. The Bank of England is still reducing rates while the ECB remains firm. The BoE cut its Bank Rate to 4.0% last month due to the UK economy slowing and inflation dropping to 2.1%. This growing gap in interest rates is why we believe the euro will strengthen against the pound.

Buying EUR/GBP Call Options

Given this outlook, we plan to buy EUR/GBP call options to profit from the expected rise. Specifically, call options that expire in March 2026 with a strike price around 0.8850 look promising. This strategy allows us to benefit from a potential increase toward the 0.9000 level while keeping our initial risk limited to the cost of the options. We’ve seen similar movements before when monetary policies have diverged. The EUR/GBP exchange rate has gone above 0.9000 multiple times, notably during the uncertainty of the late 2010s and again in 2022, when different economic paths for the UK and Eurozone were priced in. However, traders should remain cautious of any unexpectedly hawkish comments from the Bank of England, as that could quickly change this situation. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now