British Pound gains against Euro as UK Autumn Budget approaches

• EUR/GBP slips ahead of major UK and Eurozone risk events.
• Thursday’s ECB decision follows scrutiny of UK tax and spending proposals.
• French fiscal worries weigh on the Euro versus the British Pound.

0.8364 is the approximate EUR/GBP rate at the time of writing. The pair is near levels last recorded in May 2025, edging down on Tuesday as market sentiment remains mixed. France’s fiscal worries are weighing on the Euro (EUR), allowing the British Pound (GBP) to outperform. Both currencies nevertheless remain weak against their other major counterparts ahead of this week’s key events.

Wednesday’s UK Autumn Budget is the main focus for the British Pound. Under pressure to reduce living costs without losing control of government borrowing, Chancellor John Healey must set out tax and spending proposals. Traders will judge whether those plans retain sufficient headroom to comply with the government’s fiscal rules.

According to OCBC analysts, “a Budget that preserves a meaningful fiscal buffer while maintaining a credible tightening path should keep the UK fiscal risk premium contained,” while “continued foreign demand for gilts,” alongside that backdrop, would “remain supportive for GBP.” The bank says this resilience continues to favour GBP over EUR amid “comparatively softer euro-area momentum and lingering French sovereign concerns,” with a “relatively more hawkish BoE outlook.” providing further support.

2.50% is the deposit rate the European Central Bank (ECB) is widely expected to retain when it announces its monetary policy decision on Thursday. The ECB and the Bank of England (BoE) are expected to follow different paths at their forthcoming meetings. To address inflationary pressure from higher energy costs, the ECB has already delivered a cumulative 50 basis points (bps) of rate increases this year.

A pause is possible for now, Brown Brothers Harriman analysts say, citing "contained Eurozone underlying inflation and tighter financial conditions". They nevertheless warn that "resilient economic activity and inflation projected to remain above target for an extended period keep a December rate hike to 2.75% firmly in play (75% priced in)." In that context, BBH expects that "France’s bond market turmoil is likely to dominate ECB President Christine Lagarde’s press conference."

A 25 bps increase is fully priced in by traders ahead of the BoE’s interest rate decision on 5 November. Rates have remained on hold throughout this year, as policymakers saw little evidence of higher energy costs feeding through to wider prices and wages. Expectations of a rise have since strengthened following the latest inflation increase and steady labour market and growth data.

Earlier this month, BoE Governor Andrew Bailey warned, “Inflation risks rise the longer high energy prices persist.” He also said, “Monetary policy needs an unwavering commitment to returning inflation to target.”