EUR/GBP holds steady above 0.8800 as BoE rate cut expectations grow

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EUR/GBP trades on a flat note near 0.8825 in Monday’s early European session.
Weak GDP data is increasing pressure on the BoE to stimulate the economy.
ECB’s Kazāks said there is no need to adjust interest rates in the current situation.

The EUR/GBP cross flat lines around 0.8825 during the early European session on Monday. Concerns about the UK's fiscal debt and weak UK economic data could undermine the Pound Sterling (GBP) against the Euro (EUR). Bank of England (BoE) External Member Catherine Mann is scheduled to speak later on Monday.

Recent weaker-than-expected UK economic data has significantly heightened market expectations for a BoE rate reduction, potentially as early as the December meeting. The UK economy expanded at a quarterly rate of 0.1% in the third quarter (Q3) of 2025, following a 0.3% growth in Q2, the Office for National Statistics showed last week. The data missed the market forecast of 0.2% in the reported period. The UK GDP grew 1.3% YoY in Q3 versus 1.4% expected and 1.4% in Q2.

Fiscal concerns, combined with expectations of lower interest rates, tend to weaken the Pound Sterling (GBP). Interest-rate swaps indicate an approximately 79% possibility of a 25 basis point (bps) rate reduction from the Bank of England (BoE) at the next meeting on December 18, according to Reuters.

On the Euro’s front, the cautious tone of the European Central Bank (ECB) could provide some support to the EUR against the GBP. ECB policymaker and Governor of the Central Bank of Latvia Mārtiņš Kazāks said on Friday that there is no need to adjust interest rates in the current situation. The central bank will remain vigilant to any dramatic change and will adjust rates if necessary.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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