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- EUR/GBP trades flat around 0.8790 in Tuesday’s early European session.
- The UK government’s Autumn Budget will take center stage later on Wednesday.
- ECB has kept rates steady since June, with policymakers suggesting they are in a “good place.”
The EUR/GBP cross holds steady near 0.8790 during the early European session on Tuesday. Markets might turn cautious ahead of the UK government’s Autumn Budget, which is scheduled for Wednesday. The final reading of German Gross Domestic Product (GDP) for the third quarter (Q3) will be released later on Tuesday.
UK Chancellor of the Exchequer Rachel Reeves is expected to raise income taxes on households to fill the £22 billion shortfall in the government’s finances. Traders will monitor measures to cut spending, boost economic growth, and reduce inflation, helping the Bank of England (BoE) continue on a rate-cutting path that could resume in December and into next year.
Markets are now pricing in a 60% probability of a rate reduction at the December meeting, and a majority of economists surveyed by Reuters also anticipate a cut. The prospect of a further BoE rate cut might exert some selling pressure on the Pound Sterling (GBP) and act as a tailwind for the cross.
Meanwhile, the European Central Bank (ECB) seems to be nearing the end of its rate-cutting cycle, with most analysts expecting no rate change at the December meeting and only a slim chance of a further quarter-percentage-point reduction in 2026. This is consistent with the ECB’s message that inflation is contained. Eurozone inflation hovered around 2.1% in October, and underlying measures remain consistent with the ECB’s medium-term 2% target. The cautious tone of the ECB could provide some support to the Euro (EUR) against the GBP in the near term.
