EUR/GBP eased toward 0.8820 during early European trading on Thursday, losing some upward momentum even as expectations grow for a Bank of England (BoE) rate cut at the December meeting. The downside, however, may be limited as softening UK economic indicators continue to pressure the Pound.
Traders will turn their attention to Germany’s Producer Price Index (PPI) and the Eurozone Consumer Confidence data due later in the day.
Weak UK Data Boosts BoE Rate-Cut Bets
Recent UK economic releases—including cooling CPI inflation, disappointing GDP, and weaker Industrial Production—have reinforced expectations that the BoE may ease policy next month. On Wednesday, the ONS reported that UK headline inflation declined to 3.6% YoY in October, down from 3.8% in September, in line with expectations.
Additionally, uncertainty surrounding the UK’s autumn budget, set for release on November 26, is weighing on market sentiment. A pessimistic fiscal outlook could further undermine the Pound ahead of the BoE’s next decision.
ECB Seen on Extended Policy Hold, Supporting EUR
While the BoE faces growing pressure to cut rates, the European Central Bank maintains a cautious, steady stance. A large majority of economists in a Reuters poll expect the ECB to hold rates through at least the end of 2026, supported by inflation near the 2% target, stable GDP, and historically low unemployment.
This contrast in policy trajectories lends underlying support to the Euro against the Pound.
Pound Sterling: Key Background
- Pound Sterling (GBP) is the world’s oldest currency and the UK’s official monetary unit.
- It is the fourth most traded currency globally, active in pairs such as GBP/USD (Cable), GBP/JPY (Dragon), and EUR/GBP.
- The Bank of England is the primary driver of GBP valuation, using interest rate decisions to maintain price stability around its 2% inflation target.
- Strong economic data can lift the Pound by attracting investment and prompting tighter monetary policy, while weak data tends to put downward pressure on GBP.
- The Trade Balance also plays a role: a surplus supports currency strength, while a deficit tends to weigh on the Pound.
