The euro reversed two days of losses on Friday, trading around 0.8808 versus the pound and poised for a third consecutive weekly gain. Sterling came under pressure after the Bank of England left its Bank Rate unchanged at 4%, but delivered a clearly dovish message.
Five of the nine MPC members voted to hold rates, while four backed an immediate cut—highlighting a growing bias toward easier policy. Governor Andrew Bailey noted that inflation is falling faster than expected and hinted that “policy will not need to remain this restrictive for too long,” stirring speculation that rate cuts could arrive in the coming months.
All eyes now turn to the UK Budget on November 26. Chancellor Rachel Reeves faces a £20–30 billion shortfall and is widely expected to propose tax increases and restrained public spending—measures that could slow growth further and strengthen the case for the BoE to ease sooner rather than later.
By contrast, the European Central Bank kept its deposit rate at 2% on October 30 and emphasized a data-by-data, meeting-by-meeting approach. President Christine Lagarde said price pressures have moderated and that policy is “in a good place,” while leaving open the option to adjust if inflation or growth deviates from forecasts. The widening policy gap—an imminent easing shift at the BoE versus the ECB’s more balanced stance—remains a key driver behind EUR/GBP’s recent advance.
