The euro rebounded to 0.8775 against the pound due to pressure on the pound, with the market focusing on the Bank of England's interest rate decision and political uncertainty in France.
2025-11-04 14:54:22
The euro rose slightly against the pound (EUR/GBP) to 0.8775 in early trading on Tuesday, ending a two-day losing streak. The weakening pound was a key driver of this rebound, with the market largely focused on the Bank of England's (BoE) interest rate decision scheduled for Thursday.
Although the market generally expects the Bank of England to keep interest rates unchanged at 4.0% at its November policy meeting, recent slowdowns in inflation and wage growth have led some analysts to bet on an increased possibility of a rate cut.
Market research indicates that investors currently estimate a roughly one-third probability that the Bank of England will cut interest rates by a quarter percentage point at this meeting. Market focus will also be on the speech delivered by Bank of England Governor Andrew Bailey after the meeting.
If the wording is dovish, suggesting a future shift towards easing policies, it could further depress the pound's exchange rate, thus providing upward momentum for the euro against the pound.
Regarding the euro, the European Central Bank (ECB) kept its deposit rate unchanged at 2.0% for the third consecutive week last week. ECB President Christine Lagarde stated after the meeting that the central bank is currently in a "good position" and will take all necessary measures to maintain this favorable position.
Meanwhile, Joachim Nagel, a member of the European Central Bank's Governing Council, also pointed out that the eurozone's economic data was in line with the central bank's expectations, but policy options remained flexible.
In addition to monetary policy factors, domestic political uncertainty in France has also put additional pressure on the euro's performance. French Prime Minister Sebastien Lecornu's government faces greater political pressure after failing to pass a wealth tax bill in the lower house.
Markets are concerned that this could repeat the situation where the previous government was forced to resign due to the rejection of its fiscal plan, and could even lead to early elections. If the political situation in France deteriorates again, it could weaken the euro's rebound momentum against the pound in the short term.
From a technical perspective, the euro/pound pair has found temporary support around 0.8750. After a short-term break above 0.8770, initial resistance levels are at 0.8800 and 0.8825. If the Bank of England releases dovish signals on Thursday, the exchange rate may further test the 0.8850 level.
Conversely, if the central bank's stance leans towards maintaining a high-interest-rate cycle, the pound may strengthen again, causing the currency pair to pull back to around 0.8740.
Editor's Note:
From a market structure perspective, the core of short-term fluctuations in the euro/pound exchange rate lies in changes in expectations regarding the Bank of England's policy. If the Bank of England signals easing, it will provide short-term support for the euro; however, political uncertainty in France could be a potential risk limiting the euro's gains.
Overall, against the backdrop of weakening UK economic data and stable Eurozone policies, EUR/GBP may maintain a moderate upward trend, but the subsequent trend still depends on the Bank of England's latest statement on the inflation outlook.
Although the market generally expects the Bank of England to keep interest rates unchanged at 4.0% at its November policy meeting, recent slowdowns in inflation and wage growth have led some analysts to bet on an increased possibility of a rate cut.
Market research indicates that investors currently estimate a roughly one-third probability that the Bank of England will cut interest rates by a quarter percentage point at this meeting. Market focus will also be on the speech delivered by Bank of England Governor Andrew Bailey after the meeting.
If the wording is dovish, suggesting a future shift towards easing policies, it could further depress the pound's exchange rate, thus providing upward momentum for the euro against the pound.
Regarding the euro, the European Central Bank (ECB) kept its deposit rate unchanged at 2.0% for the third consecutive week last week. ECB President Christine Lagarde stated after the meeting that the central bank is currently in a "good position" and will take all necessary measures to maintain this favorable position.
Meanwhile, Joachim Nagel, a member of the European Central Bank's Governing Council, also pointed out that the eurozone's economic data was in line with the central bank's expectations, but policy options remained flexible.
In addition to monetary policy factors, domestic political uncertainty in France has also put additional pressure on the euro's performance. French Prime Minister Sebastien Lecornu's government faces greater political pressure after failing to pass a wealth tax bill in the lower house.
Markets are concerned that this could repeat the situation where the previous government was forced to resign due to the rejection of its fiscal plan, and could even lead to early elections. If the political situation in France deteriorates again, it could weaken the euro's rebound momentum against the pound in the short term.
From a technical perspective, the euro/pound pair has found temporary support around 0.8750. After a short-term break above 0.8770, initial resistance levels are at 0.8800 and 0.8825. If the Bank of England releases dovish signals on Thursday, the exchange rate may further test the 0.8850 level.
Conversely, if the central bank's stance leans towards maintaining a high-interest-rate cycle, the pound may strengthen again, causing the currency pair to pull back to around 0.8740.
Editor's Note:
From a market structure perspective, the core of short-term fluctuations in the euro/pound exchange rate lies in changes in expectations regarding the Bank of England's policy. If the Bank of England signals easing, it will provide short-term support for the euro; however, political uncertainty in France could be a potential risk limiting the euro's gains.
Overall, against the backdrop of weakening UK economic data and stable Eurozone policies, EUR/GBP may maintain a moderate upward trend, but the subsequent trend still depends on the Bank of England's latest statement on the inflation outlook.
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