British Pound strengthens against Euro ahead of UK Autumn Budget

• EUR/GBP edges lower as traders brace for key UK and Eurozone risk events.
• UK tax and spending plans take centre stage ahead of Thursday’s ECB decision.
• France’s fiscal concerns keep the Euro on the back foot against the British Pound.

EUR/GBP edges lower on Tuesday amid a mixed market mood, with the British Pound (GBP) outperforming the Euro (EUR) as France’s fiscal concerns weigh on the single currency. However, both currencies remain weak against their other major peers as traders brace for key events this week. At the time of writing, EUR/GBP trades around 0.8364, near levels last seen in May 2025.

The UK Autumn Budget on Wednesday is the key event for the British Pound. Chancellor John Healey faces pressure to ease living costs while keeping government borrowing under control. Traders will assess whether tax and spending plans leave enough room to meet the government’s fiscal rules.

Analysts at OCBC highlight that “a Budget that preserves a meaningful fiscal buffer while maintaining a credible tightening path should keep the UK fiscal risk premium contained,” and that, together with “continued foreign demand for gilts,” this backdrop would “remain supportive for GBP.” OCBC adds that this resilience, set against “comparatively softer euro-area momentum and lingering French sovereign concerns,” continues to support GBP against EUR, underpinned by a “relatively more hawkish BoE outlook.”

The Bank of England (BoE) and the European Central Bank (ECB) are expected to take different steps at their upcoming meetings. The ECB announces its monetary policy decision on Thursday and is widely expected to keep its deposit rate unchanged at 2.50%. The central bank has already raised rates by a cumulative 50 basis points (bps) this year to counter inflation pressures from higher energy costs.

Analysts at Brown Brothers Harriman note that "contained Eurozone underlying inflation and tighter financial conditions" give policymakers scope to pause for now. However, they caution 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)." Against this backdrop, BBH expects that "France’s bond market turmoil is likely to dominate ECB President Christine Lagarde’s press conference."

The BoE announces its interest rate decision on November 5, with traders fully pricing in a 25 bps hike. The central bank has kept rates unchanged so far this year as policymakers saw limited signs of higher energy costs spreading into broader prices and wages. However, the latest rise in inflation, alongside steady labour market and growth figures, has strengthened expectations of an increase.

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