Euro trades within a range against British Pound as focus turns to UK and Eurozone GDP

• EUR/GBP remains range-bound as market participants weigh the monetary policy paths of the BoE and ECB.
• The Euro’s upside remains capped by French fiscal worries, even as markets expect a further ECB rate increase.
• GDP data from the UK and Eurozone later this week may give the cross a fresh directional cue.

The British Pound (GBP) retains its advantage over the Euro (EUR), leaving EUR/GBP confined to a tight range on Monday near levels previously recorded in April 2025. Market participants are assessing the interest rate outlook for the Bank of England (BoE) and the European Central Bank (ECB), with the cross quoted at around 0.8343 at the time of writing.

An 8-1 vote at the BoE’s November policy meeting delivered a 25 basis points (bps) increase in the benchmark interest rate to 4.00%. Catherine Mann, an external MPC member, preferred a steeper 50 bps rise to 4.25%. This was the central bank’s first rate increase since 2023, aimed at curbing inflationary pressure from rising energy costs associated with the Middle East war.

After UK Consumer Price Index (CPI) inflation climbed to 3.5% in September, the Monetary Policy Committee (MPC) projected that it would reach around 5% by mid-2027. Further rate increases remain an option, with policymakers cautioning that an extended Middle East conflict could leave inflation elevated for longer.

The Bank of England’s hawkish stance was reinforced by Governor Bailey, according to analysts at MUFG/BTMU, who say he “stated clearly that there was a strong case for another rate hike if the US-Iran conflict is not resolved,”. As policymakers adjust to changing geopolitical and market conditions, the analysts add 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,”.

For the ECB, October brought an unchanged deposit rate of 2.50%, following cumulative increases of 50 bps earlier this year as rising energy costs drove Eurozone inflation above the central bank’s 2% target. The region’s headline inflation accelerated to 4.0% YoY in October, whereas core inflation remained at 2.5%.

Worries about France’s public finances continue to weigh on the single currency, leaving expectations of a further ECB rate increase in December with little ability to support the Euro against the British Pound.

This week’s data calendar includes the UK’s initial estimate of third-quarter Gross Domestic Product (GDP) on Thursday and revised Eurozone GDP data on Friday. Comments from BoE and ECB officials will also be monitored for indications of the future interest rate path.