Euro regains ground against British Pound as focus shifts to UK Budget

• EUR/GBP posts a modest recovery, with investors cutting Sterling exposure before the UK Budget.
• While Thursday’s ECB decision is expected to leave rates unchanged, the BoE is seen raising rates in November.
• Oversold RSI readings point to a possible easing in selling pressure, though the technical bias remains bearish.

Selling pressure on EUR/GBP eases on Wednesday, interrupting two consecutive days of losses as traders reduce British Pound exposure before the UK Autumn Budget, due at 12:30 GMT. The cross is trading near 0.8375 at the time of writing, a gain of 0.17% for the day, although it remains close to its lowest levels since May 2025.

How could the UK budget shape GBP and gilts?

For Brown Brothers Harriman strategists, “GBP and gilts will take their cue from today’s UK budget,” and investors are focused on whether the government “preserves the planned fiscal tightening and keeps gilt issuance in check.” In their assessment, “maintaining or increasing the fiscal squeeze should support gilts by easing inflation pressure and tempering BoE hike expectations.” The implications for Sterling are less straightforward: they warn that “stronger fiscal credibility would compete with lower rate support and limit upside,” while “fiscal slippage and heavier gilt issuance can drive gilt yields up and GBP down.”

A 25 bps increase is fully priced in by traders ahead of the BoE’s interest rate decision on November 5. Rates have remained on hold so far this year, with policymakers finding little evidence that higher energy costs were feeding through to prices more broadly or to wages. Expectations of a hike have nevertheless firmed following the latest acceleration in inflation, together with steady labour market and growth data.

Sentiment towards the Euro remains fragile amid worries about France’s public finances. Meanwhile, Thursday’s policy announcement from the European Central Bank (ECB) is coming into focus. After raising rates by a cumulative 50 bps this year to address inflationary pressure from higher energy costs, the ECB is widely expected to retain its deposit rate at 2.50%. The market will watch for indications of whether policymakers favour a further increase in December.

Can oversold conditions ease the bearish technical pressure?

A bearish bias persists on the daily EUR/GBP chart, where spot remains well beneath the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), grouped between roughly 0.8520 and 0.8611. This concentration of overhead supply weighs on the pair. At around 24, the Relative Strength Index (RSI) indicates oversold conditions that could temper near-term declines; however, the negative Moving Average Convergence Divergence (MACD) histogram continues to suggest sustained selling pressure.

Any recovery would first encounter the nearby horizontal resistance at 0.8400, with 0.8450 and 0.8500 next in line. Beyond these levels sit the 50-day SMA at 0.8520 and the 100-day SMA at 0.8545, while the 200-day SMA at 0.8611 provides a more distant ceiling.

The horizontal level at 0.8360 offers immediate support. Holding above this level could allow a corrective rebound towards the resistance band outlined above, whereas a decisive break beneath it would pave the way for the downtrend to extend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)