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EUR/GBP Holds Near Five-Month High as ECB Stays on Hold, Pound Struggles Ahead of UK Budget
Traders' Opinions
Summary:
The EUR/GBP pair hovered near 0.8800 on Thursday, its highest level since May 2023, after the European Central Bank left rates unchanged and reaffirmed a data-dependent stance.
Buy
TradingEURGBP
EXP
0.87900
Entry Price
0.89000
TP
0.87100
SL
0.87677 +0.00013 +0.01%
0
Point
Flat
0.87100
SL
CLOSING
0.87900
Entry Price
0.89000
TP
The EUR/GBP pair consolidated near a five-month high around 0.8800 on Thursday, buoyed by a broadly steady Euro and a fragile Pound Sterling. The divergence between the European Central Bank’s (ECB) cautious optimism and the United Kingdom’s faltering domestic outlook has reignited buying interest in the cross, underscoring the widening policy gap between Frankfurt and London.
The ECB kept its key interest rates unchanged, as expected — maintaining the main refinancing rate at 2.15%, the marginal lending facility at 2.4%, and the deposit facility at 2%. The central bank emphasized that inflation remains close to its medium-term 2% target, signaling no urgency for further easing. The policy statement struck a balanced tone, highlighting both resilience and risk: while Eurozone growth continues to hold firm, the global economic backdrop remains riddled with uncertainties, from ongoing trade tensions to geopolitical flare-ups.
At her post-meeting press conference, ECB President Christine Lagarde maintained a cautiously confident stance. She acknowledged that “the outlook remains uncertain,” but emphasized that underlying inflation trends are broadly consistent with the ECB’s price stability objective. Lagarde also cited the Eurozone’s strong labor market and the delayed benefits of prior rate cuts as reasons for stability in economic activity. Yet, she warned that external risks — particularly the war in Ukraine and fragile global trade dynamics — could still weigh on the medium-term outlook.
Notably, Lagarde pointed out that a stronger Euro could dampen imported inflation pressures, potentially complicating the ECB’s task of maintaining price stability. At the same time, she cautioned that higher defense spending across member states might inject fresh inflationary pressures, suggesting that the central bank will continue to take a data-dependent approach rather than committing to any pre-defined policy path.
Economic data out of Germany earlier in the day provided additional reassurance to the ECB. Preliminary figures showed annual CPI inflation easing slightly to 2.3% in October, down from 2.4% in September, marginally above forecasts. Similarly, the Harmonized Index of Consumer Prices (HICP) — the ECB’s preferred inflation measure — slipped to 2.3% year-on-year. While the readings confirm disinflation progress, they also highlight the challenge of achieving further moderation without risking growth momentum.
Across the Channel, the Pound Sterling remains on the defensive. Traders are increasingly concerned that the UK economy could face deeper structural headwinds following the Office for Budget Responsibility’s (OBR) decision to cut productivity growth forecasts by 0.3%, a downgrade that could expand the fiscal deficit by £20 billion. The revision arrives just weeks ahead of the Autumn Budget on November 26, putting additional pressure on Chancellor Jeremy Hunt to balance fiscal prudence with growth incentives.
This weaker outlook reinforces expectations that the Bank of England (BoE) may soon pivot toward a more dovish policy stance. Money markets are now pricing in a 68% probability of a 25-basis-point rate cut in December, while Goldman Sachs and other analysts suggest the first rate reduction could come as early as next week. The possibility of an accelerated easing cycle contrasts sharply with the ECB’s steady-hand approach, driving renewed upward momentum in EUR/GBP.
Technical Analysis
From a technical standpoint, the pair’s price action has turned decisively bullish. EUR/GBP broke through a key weekly resistance with conviction, invalidating previous bearish projections. The breakout suggests renewed buying momentum, with price expected to retest the broken border zone before potentially extending gains toward the 0.8900 area — a level aligned with the upper boundary of the recent consolidation range.
Traders are closely monitoring short-term pullbacks as potential buying opportunities, particularly near the low-volume node identified around 0.8770–0.8780. Sustained closes above 0.8800 could confirm the formation of a bullish continuation pattern, while a break below 0.8750 would be needed to challenge the upward bias.
TRADE RECOMMENDATION
BUY EURGBP
ENTRY PRICE: 0.8790
STOP LOSS: 0.8710
TAKE PROFIT: 0.8900
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