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

• With the UK Budget approaching, investors pare back Sterling holdings, allowing EUR/GBP a modest recovery.
• A November rate rise is anticipated from the BoE, in contrast to expectations that the ECB will leave policy unchanged on Thursday.
• Oversold RSI readings point to a possible easing in selling pressure, though the technical picture remains bearish.

With the UK Autumn Budget due at 12:30 GMT, traders are reducing their British Pound exposure on Wednesday, giving EUR/GBP a respite after two consecutive days of losses. The cross stands at around 0.8375 at the time of writing, a daily gain of 0.17%, although it is still close to its lowest levels since May 2025.

UK budget set to shape GBP and gilt trading

For Brown Brothers Harriman strategists, the central question is whether the government “preserves the planned fiscal tightening and keeps gilt issuance in check.” They emphasise that “GBP and gilts will take their cue from today’s UK budget,” arguing that “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 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 announcement on 5 November. Rates have been left on hold throughout this year, with policymakers detecting little evidence that higher energy costs were feeding through to prices more broadly or to wages. Expectations of a rise have nevertheless firmed following the latest increase in inflation, supported by steady labour market and growth data.

Concerns about France’s public finances continue to weigh on sentiment towards the Euro. Meanwhile, Thursday brings the European Central Bank’s (ECB) policy announcement, at which its deposit rate is widely expected to remain at 2.50%. The ECB has already delivered a cumulative 50 bps of rate increases this year in response to inflationary pressure from higher energy costs. Traders will scrutinise the decision for indications of whether policymakers favour a further rise in December.

Technical Outlook Remains Bearish

EUR/GBP retains a bearish bias on the daily chart, trading well beneath the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which are grouped between roughly 0.8520 and 0.8611. This concentration of overhead supply weighs on the pair. Although a Relative Strength Index (RSI) reading of around 24 indicates oversold conditions that could temper the near-term decline, the negative Moving Average Convergence Divergence (MACD) histogram continues to suggest sustained selling pressure.

Any recovery would first encounter resistance at the nearby horizontal level of 0.8400, then at 0.8450 and 0.8500. Beyond these lie 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 line at 0.8360 offers immediate support. Holding this level could prompt a corrective rebound towards the resistance band outlined above; a decisive break beneath it, however, would leave scope for the downtrend to extend.

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