EUR/GBP holds near one-month low as ECB minutes limit downside for the Euro

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The Euro (EUR) trades flat against the British Pound (GBP) on Thursday after a sharp slide on Wednesday following the United Kingdom’s Autumn Budget. At the time of writing, EUR/GBP is trading near 0.8761, holding close to a one-month low as sentiment continues to favour Sterling.

EUR/GBP holds near a one-month low as traders assess ECB minutes and Eurozone data
ECB minutes show unanimous support for holding rates, describing the policy stance as “in a good place.”
Traders await comments from BoE’s Megan Greene, with December rate-cut expectations firming in recent weeks.

The Euro is finding some support from the latest European Central Bank (ECB) minutes, which showed unanimous backing for leaving all three key policy rates unchanged in October. The Governing Council described the policy stance as “in a good place” and highlighted the value of waiting for December’s updated projections before considering any further adjustments.

The minutes also reaffirmed that inflation is broadly moving toward the 2% target, while domestic demand and labour-market conditions remain reasonably resilient.

At the same time, policymakers noted that inflation risks remain two-sided, with members split on whether the cutting cycle has effectively ended or if additional easing might be required in 2026 should downside risks intensify.

The minutes further highlighted that markets have “almost fully priced out” any additional rate cut in 2025, while the OIS curve assigns only around a 40% probability of one more reduction by the end of 2026.

On the data front, Eurozone sentiment figures released earlier in the day painted a mixed but steady picture. The Economic Sentiment Indicator for November came in at 97, matching the market forecast of 97 and slightly above October’s 96.8. The Business Climate Index slipped to 0.66 from -0.47. Consumer Confidence was unchanged at -14.2, matching both forecasts and the October reading.

Meanwhile, the UK’s new Autumn Budget under Chancellor Rachel Reeves highlighted an increase in fiscal headroom that exceeded expectations. According to the Office for Budget Responsibility’s (OBR) latest economic and fiscal outlook, the government is projected to run a current budget surplus margin of £21.7 billion in 2029-30, compared with £9.9 billion in the March forecast.

Looking ahead, traders will shift their attention to comments from Bank of England (BoE) policymaker Megan Greene, who is scheduled to speak later on Thursday. Her remarks will be assessed for any guidance on the policy path, as markets have grown more confident in recent weeks that the BoE could move toward a rate cut in December.

BoE FAQs

What does the Bank of England do and how does it impact the Pound?

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

How does the Bank of England’s monetary policy influence Sterling?

When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.

What is Quantitative Easing (QE) and how does it affect the Pound?

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.

What is Quantitative tightening (QT) and how does it affect the Pound Sterling?

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.

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