• EUR/GBP retreats as UK budget details spur short-Sterling unwinds amid reassurance over moderate fiscal measures.
• OBR projects weak GDP through 2027, with inflation seen returning to the BoE target only by then.
• Traders watch Russia–Ukraine peace signals and cautious ECB tone after Vujcic warns of AI-bubble risks.

EUR/GBP retreats on Wednesday after the latest United Kingdom (UK) budget revealed by Chancellor Rachel Reeves appears to be well received by investors, which initially sold off the British Pound (GBP), trimming its earlier losses. At the time of writing, the cross trades at 0.8766, down 0.24%.

Sterling stabilizes as Reeves unveils tax-heavy budget with limited fiscal headroom, easing fears of major negatives

The UK’s budget raised taxes by £26 billion, following last year’s budget raised taxes by £40 billion. Reeves commented that the government would have £22 billion fiscal headroom to avoid unexpected shocks. Nevertheless, the Office for Budget Responsibility (OBR) revealed that the maneuver space is still “small” compared to the office’s forecast

OBR’s forecasts suggest that GDP for 2025 would end at 1.5%, in 2026 at 1.4% and in 2027 would be back at 1.5%. Regarding inflation, projections suggest that the Consumer Price Index (CPI) will reach the Bank of England’s target in 2027, with the office seeing CPI ending at 3% in 2025 and 2.5% in 2026.

Meanwhile, Nomura’s analysts mentioned that short Sterling positions are likely to unwind as the budget avoided “major negatives.”

In Europe, the economic docket remained absent, yet traders are eyeing developments of a possible peace deal between Russia and Ukraine. On Tuesday, US President Donald Trump said that he thinks they are getting very close to a deal.

Meanwhile, European Central Bank (ECB) member Boris Vujcic said that he sees no reason for another rate cut, though noted that “the situation could change if an AI bubble were to burst.”

EUR/GBP Price Forecast: Technical outlook

EUR/GBP is dipping towards the 50-day SMA at 0.8747, but so far it remains closer to 0.8770, capped on the upside by the 20-day SMA at 0.8799. Bears are picking up momentum, as shown by the RSI piercing below the neutral level, suggesting that selling pressure is outweighing buyers.

If EUR/GBP drops below the 50-day SMA, expect a test of the 100-day SMA at 0.8705. Conversely, if the cross edges back above 0.8800, buyers could test resistance at the day’s high of 0.8818.