UK and Eurozone GDP in focus as Euro trades sideways against British Pound

• As traders weigh the monetary policy paths of the BoE and ECB, EUR/GBP remains confined to a tight range.
• Expectations of a further ECB rate increase fail to lift the Euro as French fiscal worries cap gains.
• GDP figures from the UK and Eurozone later this week may give the cross a fresh directional cue.

EUR/GBP is trading around 0.8343 at the time of writing. Monday’s price action remains range-bound, close to levels last recorded in April 2025. Sterling (GBP) retains its advantage over the Euro (EUR), with traders assessing the policy paths of the Bank of England (BoE) and the European Central Bank (ECB).

An 8-1 vote at the BoE’s November meeting delivered a 25 basis point (bps) increase in its benchmark rate to 4.00%. Catherine Mann, an external MPC member, backed a larger rise of 50 bps to 4.25%. This was the Bank’s first rate increase since 2023. Policymakers are seeking to curb inflationary pressure from higher energy prices linked to the Middle East war.

September’s UK Consumer Price Index (CPI) inflation rate climbed to 3.5%. The Monetary Policy Committee (MPC) projects a rise to around 5% by mid-2027. Further rate increases remain an option, with policymakers cautioning that an extended Middle East conflict could prolong elevated inflation.

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

For the ECB, October brought no change to the 2.50% deposit rate. Earlier this year, it had delivered a cumulative 50 bps of increases as rising energy costs drove Eurozone inflation above its 2% target. Headline inflation in the bloc accelerated to 4.0% YoY in October; core inflation was unchanged at 2.5%.

December is expected to bring another ECB rate increase, traders anticipate. That prospect is providing little backing for the Euro against Sterling, however, as worries about France’s public finances pressure the single currency.

Thursday’s initial UK third-quarter Gross Domestic Product (GDP) estimate precedes Friday’s updated Eurozone GDP release. Alongside those figures, traders will monitor remarks from BoE and ECB officials this week for indications of the interest-rate trajectory.