Pound rocked by budget « Euro Weekly News

By EWN •
Published: 04 Dec 2025 • 18:30
• 2 minutes read

The pound is likely to weaken in December if the bank cuts rates and hints at more to come.
Credit: Shutterstock, Pla2na

Euro

EUR/GBP: Unchanged at £0.87

EUR/USD: Down from $1.16 to $1.15

Trade in the euro has been uneven in recent weeks, with underwhelming economic data from the Eurozone and a stronger US dollar frequently challenging the single currency.

On a more positive front, hopes of a breakthrough in Ukraine-Russia peace talks provided some lift for the euro towards the end of November.

Looking ahead, the European Central Bank (ECB) will deliver its final interest rate decision of the year next month. No policy changes are expected, but the bank’s outlook for 2026 could trigger some volatility.

Pound

GBP/EUR: Unchanged at €1.14

GBP/USD: Down from $1.33 to$1.31

The pound struggled through November as it was hit by the feverish speculation surrounding the Chancellor Rachel Reeves’s autumn budget, the publication of which triggered a relief rally as it helped to bring an end to months of fiscal uncertainty.

Also weighing on Sterling was a dovish voting split at the Bank of England’s (BoE) November policy meeting, which, coupled with underwhelming UK economic indicators, stoked bets for one more interest rate cut this year.

The focus for GBP investors now shifts to the BoE’s December policy meeting, with the pound likely to weaken if the bank cuts rates and hints at more to come.

US Dollar

USD/GBP: Up from £0.74 to £0.75

USD/EUR: Up from €0.85 to €0.86

The US dollar trended broadly higher over the past month, driven in large part by a repricing of Federal Reserve rate cut bets as hawkish signals from the bank and upbeat payrolls data cast doubt on a potential cut in December.

Positive risk flows did test USD demand throughout the month, particularly amid the optimism that followed the end of the US government shutdown, but the resulting downside was mostly short-lived.

Looking ahead, renewed speculation of a potential December rate cut will keep USD investors on edge in the coming weeks, with the US dollar poi- sed to fall if the Fed ultimately cuts rates.

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