UK Budget in focus as Euro recovers against British Pound

• Reduced Sterling exposure before the UK Budget supports a modest EUR/GBP rebound.
• November is expected to bring a BoE rate increase, in contrast to an anticipated ECB hold on Thursday.
• Oversold RSI readings point to potentially softer selling pressure, but the technical bias stays bearish.

EUR/GBP trades near 0.8375 at the time of writing. The cross is up 0.17% on the day, though still close to its lowest levels since May 2025. Wednesday’s modest recovery interrupts a two-day decline as sellers pause and traders cut British Pound exposure before the UK Autumn Budget at 12:30 GMT.

UK budget: GBP and gilts await key catalyst

Today’s UK budget will set the direction for Sterling and government bonds, according to Brown Brothers Harriman strategists, who say “GBP and gilts will take their cue from today’s UK budget,” as investors assess whether the government “preserves the planned fiscal tightening and keeps gilt issuance in check.” In their view, “maintaining or increasing the fiscal squeeze should support gilts by easing inflation pressure and tempering BoE hike expectations.” The implications for the Pound are less clear-cut: 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 November 5 interest rate decision. Rates have remained on hold so far this year, with policymakers finding little evidence that higher energy costs were feeding through to wider prices and wages. Expectations of a hike have nevertheless firmed following the latest inflation increase, supported by steady labour market and growth data.

France’s public finances remain a source of concern, leaving sentiment towards the Euro fragile. The European Central Bank’s (ECB) policy announcement on Thursday is also in focus. Following a cumulative 50 bps of rate increases this year to address inflation pressures from higher energy costs, the ECB is widely expected to keep its deposit rate at 2.50%. Traders will scrutinise the decision for indications of whether policymakers favour a further increase in December.

0.8360 support in focus as technical bias stays bearish

EUR/GBP retains a bearish daily-chart bias, trading well beneath the 50-day, 100-day and 200-day Simple Moving Averages (SMAs). These averages form a dense overhead supply zone spanning roughly 0.8520 to 0.8611. Although the Relative Strength Index (RSI), near 24, indicates oversold conditions that could temper near-term losses, the Moving Average Convergence Divergence (MACD) histogram remains negative, suggesting selling pressure persists.

The nearest upside barrier is the horizontal resistance level at 0.8400. Further resistance lies at 0.8450 and 0.8500, followed by the 50-day SMA at 0.8520 and the 100-day SMA at 0.8545. Higher up, the 200-day SMA at 0.8611 provides a more distant ceiling.

The horizontal level at 0.8360 provides immediate support. Holding above it could prompt a corrective rebound towards the resistance band outlined above; a decisive break below would instead leave scope for the downtrend to extend.

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