Euro remains rangebound against British Pound as traders eye UK and Eurozone GDP

• EUR/GBP trades in a narrow range as traders assess the BoE and ECB monetary policy outlooks.
• French fiscal concerns limit Euro gains despite expectations of another ECB rate hike.
• UK and Eurozone GDP releases later this week could provide fresh direction for the cross.

EUR/GBP trades sideways on Monday, holding in a narrow range near levels last seen in April 2025. The British Pound (GBP) keeps the upper hand against the Euro (EUR) as traders weigh the policy outlook for the Bank of England (BoE) and the European Central Bank (ECB). At the time of writing, the cross trades around 0.8343.

At its November policy meeting, the BoE voted 8-1 to raise its benchmark interest rate by 25 basis points (bps) to 4.00%. External MPC member Catherine Mann favoured a larger 50 bps increase to 4.25%. The move marks its first hike since 2023, as policymakers seek to contain inflationary pressures stemming from higher energy costs linked to the war in the Middle East.

UK Consumer Price Index (CPI) inflation rose to 3.5% in September, and the Monetary Policy Committee (MPC) expects it to reach around 5% by mid-2027. Policymakers left the door open to further rate hikes, warning that a prolonged conflict in the Middle East could keep inflation higher for longer.

Analysts at MUFG/BTMU highlight that Governor Bailey “stated clearly that there was a strong case for another rate hike if the US-Iran conflict is not resolved,” reinforcing the Bank of England’s hawkish bias. They note that “we have been forecasting that the BoE will follow up with another increase in February next year, but acknowledge that there is now a higher risk of a back-to-back hike in December,” as policymakers respond to evolving geopolitical and market conditions.

The ECB, meanwhile, held its deposit rate at 2.50% in October after raising it by a cumulative 50 bps earlier this year as higher energy costs pushed Eurozone inflation above its 2% target. Eurozone inflation rose to 4.0% YoY in October, while core inflation held steady at 2.5%.

Traders anticipate another ECB rate hike in December, though those expectations offer little support to the Euro against the British Pound as concerns over France’s public finances weigh on the single currency.

On the data front, the UK releases its first estimate of third-quarter Gross Domestic Product (GDP) on Thursday, followed by updated Eurozone GDP figures on Friday. Traders will also listen to BoE and ECB officials this week for clues on the path of interest rates.