Euro rebounds against British Pound as UK Budget takes centre stage

• EUR/GBP recovers modestly as investors reduce Sterling exposure ahead of the UK Budget.
• The BoE is expected to raise rates in November, while the ECB is seen holding steady on Thursday.
• The technical outlook remains bearish, although oversold RSI conditions suggest selling pressure could ease.

EUR/GBP bears take a breather on Wednesday, pausing a two-day losing streak as traders trim their exposure to the British Pound ahead of the UK Autumn Budget at 12:30 GMT. At the time of writing, the cross trades around 0.8375, up 0.17% on the day, but remains near its lowest levels since May 2025.

UK budget seen as key driver for GBP and gilts

Strategists at Brown Brothers Harriman stress that “GBP and gilts will take their cue from today’s UK budget,” with market attention centred on whether the government “preserves the planned fiscal tightening and keeps gilt issuance in check.” They argue that “maintaining or increasing the fiscal squeeze should support gilts by easing inflation pressure and tempering BoE hike expectations.” However, for the Pound, they caution that “stronger fiscal credibility would compete with lower rate support and limit upside,” whereas “fiscal slippage and heavier gilt issuance can drive gilt yields up and GBP down.”

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.

On the Euro side, concerns over France’s public finances keep sentiment fragile. Separately, attention turns to the European Central Bank’s (ECB) policy decision on Thursday. The ECB is widely expected to leave its deposit rate unchanged at 2.50%, having already raised rates by a cumulative 50 bps this year to counter inflation pressures from higher energy costs. Traders will look for clues on whether policymakers are leaning towards another hike in December.

Technical Analysis

On the daily chart, EUR/GBP extends a bearish bias as spot holds well below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) clustered from roughly 0.8520 up to 0.8611. The pair is pressurized by this dense overhead supply, while the Relative Strength Index (RSI) around 24 signals oversold conditions that could slow immediate downside, but the negative Moving Average Convergence Divergence (MACD) histogram still hints at persistent selling pressure.

On the topside, initial resistance is seen at the nearby 0.8400 horizontal level, followed by 0.8450 and 0.8500, ahead of the 50-day SMA at 0.8520 and the 100-day SMA at 0.8545, with the 200-day SMA at 0.8611 acting as a more distant cap.

On the downside, immediate support is located at the 0.8360 horizontal line. A clear break below this floor would open the way for an extension of the downtrend, while holding above it could encourage a corrective bounce toward the mentioned resistance band.

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