Limited upside for Pound this week
The EUR/GBP currency pair remains steady in Monday’s European session, trading near the key support zone of 0.8760–0.8770. This stability comes ahead of the United Kingdom’s upcoming budget announcement on Wednesday. While the British Pound faces limited upside, analysts warn of potential downside risks—especially if markets are underpricing the Bank of England’s expected rate-cut cycle in 2026.
According to Chris Turner, Head of FX Strategy at ING, the estimated risk premium for EUR/GBP and UK 10-year Gilts stood at approximately 0.5% and 10 basis points, respectively, as of Friday. These figures suggest that markets are approaching the budget with caution.
Turner notes that if the UK government delivers a credible and fiscally tight budget, Sterling’s upside will likely remain constrained. Conversely, if the market has underestimated the likelihood of rate cuts in 2026, Sterling could face renewed selling pressure.
The upcoming UK budget is expected to play a pivotal role in shaping the Pound’s trajectory. Traders are watching for signs of fiscal discipline, economic support measures, and clues about future interest rate paths. A budget that signals higher deficits or expansionary policies could trigger downside moves in Sterling.
Meanwhile, monetary policy remains central to market sentiment. If investors revise their expectations around the Bank of England’s easing cycle, EUR/GBP could experience heightened volatility.
From a technical perspective, EUR/GBP has stabilized near the 0.8760–0.8770 support zone, preventing further declines for now. If this level holds, the pair may attempt a rebound toward 0.8800. A break above that resistance could open the path to 0.8830 and 0.8855.
On the downside, a decisive break below 0.8760 would expose the pair to 0.8735, followed by the monthly low near 0.8700.
Summary:EUR/GBP is holding firm ahead of the UK budget, with analysts highlighting limited upside for Sterling and potential risks tied to monetary policy expectations. Traders are closely watching Wednesday’s announcement for signals that could shape the next move. For now, 0.8760 remains a key support level, while 0.8800 serves as immediate resistance.