Euro holds its range against British Pound with UK and Eurozone GDP in focus

• With the BoE and ECB policy outlooks under scrutiny, EUR/GBP remains confined to a tight trading range.
• Expectations of a further ECB rate rise fail to lift the Euro significantly as French fiscal worries constrain gains.
• GDP figures from the UK and Eurozone later this week may give the cross a fresh directional impetus.

At around 0.8343 at the time of writing, EUR/GBP remains rangebound on Monday, close to levels last recorded in April 2025. Sterling (GBP) retains its advantage over the Euro (EUR), with traders assessing the interest rate outlook at the Bank of England (BoE) and the European Central Bank (ECB).

An 8-1 vote at the BoE’s November policy meeting delivered a 25 basis point (bps) rise in the benchmark interest rate to 4.00%. Catherine Mann, an external MPC member, preferred a larger increase of 50 bps to 4.25%. The first rise since 2023 comes as policymakers try to curb inflationary pressure from higher energy costs associated with the war in the Middle East.

After UK Consumer Price Index (CPI) inflation climbed to 3.5% in September, the Monetary Policy Committee (MPC) expects it to reach around 5% by mid-2027. Further rate rises remain an option, with policymakers cautioning that an extended Middle East conflict could leave inflation elevated for longer.

The Bank of England’s hawkish leaning was reinforced by Governor Bailey, according to analysts at MUFG/BTMU, who point out that he “stated clearly that there was a strong case for another rate hike if the US-Iran conflict is not resolved,”. As policymakers react to changing geopolitical and market conditions, the analysts add that “we have been forecasting that the BoE will follow up with another increase in February next year, but acknowledge that there is now a higher risk of a back-to-back hike in December,”.

Across the Eurozone, October inflation climbed to 4.0% YoY, although the core rate remained at 2.5%. The ECB left its deposit rate unchanged at 2.50% that month, following cumulative increases of 50 bps earlier this year as rising energy costs took inflation above its 2% target.

A further ECB rate rise in December is anticipated by traders. Even so, the prospect provides scant support for the Euro against sterling, as worries about France’s public finances put pressure on the single currency.

Thursday brings the UK’s initial estimate of third-quarter Gross Domestic Product (GDP), ahead of revised Eurozone GDP data on Friday. Remarks from BoE and ECB officials will also be watched this week for indications of where interest rates are heading.