• EUR/GBP remains virtually unchanged around 0.8760 on Friday.
• Stable German inflation and expectations of a prolonged pause by the ECB support sentiment toward the Euro.
• The renewed contraction in UK GDP in October reinforces expectations of monetary easing by the Bank of England.

EUR/GBP trades without a clear direction on Friday, hovering around 0.8760 at the time of writing, with the pair remaining stable despite contrasting macroeconomic developments between the Eurozone and the United Kingdom. Data published in Germany confirms that inflation remains contained, while the UK’s economic trajectory continues to weaken, increasing pressure on the Bank of England (BoE).

In the Eurozone, the Harmonized Index of Consumer Prices (HICP) edged up to 2.6% YoY in November, after 2.3% in October, in line with preliminary estimates. On a monthly basis, prices fell by 0.5%, limiting the impact on the Euro (EUR). This stability reinforces the idea that the European Central Bank (ECB) has reached a balanced stance in its monetary policy. President Christine Lagarde reiterated that the current policy setting “is in a good position”, while Governing Council members François Villeroy de Galhau and Gediminas Simkus said there is no immediate need to cut or raise rates.

In contrast, the Pound Sterling (GBP) comes under renewed pressure following the release of UK Gross Domestic Product (GDP), which contracted by 0.1% in October, missing expectations of a modest expansion. This data contradicts the recent upward revision by the Office for Budget Responsibility, which had lifted its 2025 growth forecast to 1.5%. Investors see this report as another confirmation of the UK economy’s persistent weakness, fueling expectations of a rate cut at next week’s BoE meeting.

Industrial Production offered a mild positive surprise, rising 1.1% in October, though Manufacturing Production slowed to 0.5%, indicating that the sector continues to struggle to regain momentum. In this environment, the fundamental backdrop remains unfavourable for the Pound Sterling, while the Euro benefits from greater monetary stability.

EUR/GBP may therefore remain broadly stable in the short term, but risks appear slightly tilted in favour of the single currency as long as markets anticipate a more accommodative BoE compared with an ECB committed to a prolonged pause.