EUR/GBP slips to channel floor as Fed cut bets revive risk appetite

Market overview: Risk-on mood meets a European cross

The backdrop for EUR/GBP this week is not primarily European, but American. Global markets started the week with a powerful risk-on move: the S&P 500 posted its strongest daily gain in around six weeks and the Nasdaq 100 rallied more than 2%, driven by renewed optimism that the Federal Reserve will cut rates at its December meeting. Several FOMC members, including Governor Waller, New York Fed President Williams and San Francisco Fed President Daly, have signalled that another cut is on the table, arguing that softer activity data and lingering labour-market risks justify additional insurance easing. Money-market pricing now implies a probability comfortably above two-thirds for a December cut.

The mechanical effect has been lower US yields: the 10-year Treasury yield has slipped close to 4%, easing global financial conditions and re-energising the hunt for risk assets, from US tech stocks to high-beta FX. Bitcoin, after an initial wobble, recovered and traded higher again, a classic sign that speculative risk appetite is alive.

For EUR/GBP, a lower-yield, risk-on environment typically benefits currencies perceived as more cyclical and higher-beta relative to the euro’s lower-beta, funding-currency role. Sterling tends to benefit more than the euro when global risk appetite improves, because the UK equity market and the pound are more sensitive to the global cycle and cross-border capital flows.

Eurozone: Subdued growth, steady ECB

On the euro side, the policy narrative has shifted from aggressive easing to cautious wait-and-see. ECB Governing Council member Olaf Sleijpen recently characterised risks around the inflation outlook as “balanced” and argued that current policy settings are appropriate. Markets interpret this as confirmation that the ECB has completed its rate-cutting cycle after lowering the deposit rate to around 2% over the last year.

The ECB’s upcoming Financial Stability Review will likely underscore the fragility of growth in parts of the euro area and lingering vulnerabilities in bank profitability, but with headline inflation hovering near target and underlying measures trending lower, there is little appetite to re-tighten policy. Research on euro-area growth vulnerability also highlights that Germany remains particularly exposed to broader euro-area and global downturns, amplifying the sense that the growth premium of the euro zone over the UK is limited at best.

In practice, the ECB is on hold, comfortable with a gently disinflating environment, and not eager to push yields higher. That removes an important pillar of euro support.

United Kingdom: Weak demand but a relatively hawkish BoE

The UK picture is more complicated. The economy remains weak: previous GDP prints, soft retail sales and anaemic investment all point to a stagnant growth environment. Yet UK inflation, while falling, has been stickier than in the euro area, and the BoE’s latest communications still emphasise the risk of entrenched price pressures. Several MPC members have warned that rate cuts will be gradual and data-dependent.

Markets are focused on the forthcoming Autumn Forecast Statement, where the government must balance limited fiscal space with political pressure to provide some tax relief ahead of elections. The consensus view is that any giveaways will be modest and offset by long-term tightening elsewhere, limiting the risk of a bond-market revolt. That reduces downside risk for gilts and the pound.

Net-net, investors see the BoE as marginally less dovish than the ECB over the 6–12 month horizon. Rate-differential curves reflect that: forward OIS markets price fewer cumulative BoE cuts than ECB cuts over 2026, supporting sterling on crosses like EUR/GBP.

Where this leaves EUR/GBP

In this macro context, the recent pullback in EUR/GBP from above 0.8850 to the 0.8780 area looks like a logical adjustment of the cross to:

• lower global yields and a more constructive risk backdrop, which favour GBP over EUR; and
• a policy configuration where the ECB is clearly done cutting for now, but not leaning hawkish, while the BoE still has to guard against lingering inflation and has less space to cut.

The macro picture therefore aligns with a gradual, medium-term drift lower in EUR/GBP, interrupted by technical counter-trend rallies as positioning and short-term flows rebalance.

Technical and volume analysis

Current technical conditions

The 4-hour EUR/GBP chart shows a cross that has enjoyed a well-defined uptrend since late October, but is now testing that structure:

• Price has been contained within a rising regression channel for several weeks, with higher highs and higher lows from the 0.8680 area up to recent peaks just above 0.8850.
• The latest leg, however, has lost momentum. After failing to hold above 0.8840–0.8850, EUR/GBP has slipped back toward the lower half of the channel and now trades near 0.8780, effectively touching the channel floor.
• Bollinger Bands on the 4-hour timeframe show price oscillating around the mid-band for most of November, but recent candles sit closer to the lower band; the mid-line and the 4-hour WMA (around 0.8810) are now overhead, acting as dynamic resistance.
• The lower band itself is around 0.8775–0.8780, overlapping with the channel support and reinforcing this zone as a critical pivot.

Momentum and volatility indicators confirm that the up-move is tired and that the cross is in a vulnerable consolidation:

• The PPO, which measures percentage price oscillator momentum, has rolled over from positive territory and now sits slightly negative, with the signal line on top and the histogram close to zero. This is typical of an ageing trend where bullish momentum is fading but has not yet flipped into a strong bearish impulse.
• BBW (Bollinger Band Width) has compressed considerably over the last several sessions, signalling a volatility squeeze. In such phases, the market is effectively coiling; the next directional break, up or down, tends to be decisive.
• ROC (rate of change) has slipped marginally below zero, reflecting the recent grind lower in price; however, the moves are shallow rather than impulsive.
• MFI (Money Flow Index) sits in the low-40s area, slightly below neutral, consistent with mild net outflows from EUR into GBP, but far from oversold extremes.

Four-hour volume has been moderate. The latest leg lower has occurred on average or slightly lighter volume compared to the earlier rally phases. There is no sign yet of capitulation selling, but there is also no evidence of aggressive dip-buying around 0.8780—traders are watching the channel floor rather than acting boldly.

In sum, the chart shows a maturing uptrend with deteriorating momentum, sitting on important structural support, in a low-volatility regime that is likely to break one way or the other in coming sessions.

Short-term price structure and Fibonacci levels

The most recent swing high around 0.8820–0.8820 and swing low near 0.8780 give a useful Fibonacci map:

• 0% retracement: 0.88199 (local high)
• 23.6% retracement: roughly 0.88106
• 61.8% retracement: near 0.87954
• 100% retracement: 0.87803 (local low)
• 127.2% extension: 0.87695
• 161.8% extension: 0.87558

Price is currently oscillating between the 61.8% retracement and the 100% zone, with intraday tests of 0.8780 being met with only modest bids. The 127.2% / 161.8% extensions cluster just below the channel floor, meaning that a decisive break under 0.8780 could quickly drag the pair toward 0.8770 and 0.8755 as stop-loss and momentum orders are triggered.

Main scenario: Corrective bounce, then gradual drift lower

Given the blend of technical, volume and macro factors, the base case is as follows:

1. In the very near term (coming 24–48 hours), EUR/GBP is likely to respect the 0.8780 support area on first test.
2. • The confluence of the rising channel base, the lower Bollinger Band and the recent swing low typically attracts some tactical dip-buying.
   • Momentum indicators are negative but not yet in “trend-mode” bearish territory; they are consistent with consolidation rather than collapse.
2. A modest corrective bounce back toward the 0.8800–0.8820 region is therefore the path of least resistance.
3. • This would bring price back toward the 4-hour WMA and the Bollinger mid-line around 0.8810, an area where previous intraday rallies have stalled.
   • Such a move would also relieve short-term oversold pressure on ROC and MFI without materially changing the medium-term picture.
3. Medium-term (multi-week), the odds favour the up-channel eventually breaking to the downside and EUR/GBP grinding lower.
4. • The loss of momentum at higher highs, the failure to sustain trade above 0.8850, and the repeated tests of the channel base point to trend exhaustion.
   • Macro drivers – slightly more hawkish BoE expectations compared to the ECB and the potential for UK-specific fiscal clarity from the Autumn Statement – argue for mild sterling out-performance on a 1–3 month view.
   • As markets fully price a December Fed cut and global risk stays supported, portfolios are likely to add GBP as a higher-beta European proxy at the expense of the euro.

Under this main scenario, rallies into the 0.8800–0.8820 region are viewed as opportunities to initiate or add to medium-term short EUR/GBP positions, with downside targets at:

• 0.8765–0.8755 (Fibonacci extension cluster and initial channel break objective);
• 0.8725 (late-October consolidation area and measured move equal to the height of the recent distribution zone);
• 0.8700 (psychological level and approximate projection of the channel width).

Volume analysis supports this approach. The absence of heavy demand at current levels suggests the market is not heavily under-positioned in EUR/GBP; there is room for selling to accelerate once important supports give way, especially if macro data favour sterling or risk assets more broadly.

Key technical levels

Resistance:

• 0.8795 – 4-hour 61.8% retracement and immediate intraday pivot.
• 0.8810 – 4-hour WMA and Bollinger mid-line; former support, now first major resistance.
• 0.8820–0.8830 – recent distribution ceiling and upper edge of the short-term consolidation box.
• 0.8850 – November swing high and approximate upper third of the rising channel; a break above here would negate the near-term bearish bias.

Support:

• 0.8780 – channel base and recent swing low; first line of defence for bulls.
• 0.8769 – 127.2% Fibonacci extension; potential magnet on a clean break of 0.8780.
• 0.8756 – 161.8% extension; key downside target and likely profit-taking area for short-term bears.
• 0.8725 – late-October support and mid-term objective under the main scenario.
• 0.8700 – round-number support and a natural level for options-related interest.

Alternative scenario: Range extension and renewed up-leg

The lower-probability, but still plausible, scenario is that 0.8780 holds definitively, global risk appetite falters, or the UK Autumn Statement disappoints, prompting a fresh wave of euro buying and sterling selling.

Technically, the trigger would be:

• A sustained 4-hour close above 0.8830, followed by a break of 0.8850.

In that case, the recent pullback would be re-classified as a simple mid-channel correction within an ongoing uptrend, opening the door for:

• a retest of 0.8880–0.8900 (projected upper channel boundary and round-number resistance); and
• potentially a move into the low-0.89s if euro-area data surprise positively or UK-specific risks (for example, political instability or a bond-market backlash to fiscal easing) re-emerge.

From a risk-management perspective, such an outcome would force short EUR/GBP positions to cover above 0.8850–0.8880 and re-assess the structural narrative.

Fundamental outlook from the economic calendar

The immediate calendar is dominated by US data and Fed-related developments, but there are several European and UK events that matter for EUR/GBP traders.

US data cluster: PPI, retail sales, GDP and PCE

Over the next 48 hours, markets will digest a dense set of US releases: producer-price inflation, retail-sales components, goods orders, Q3 GDP revisions and the Fed’s preferred inflation gauge, the core PCE price index. Combined with survey data and housing figures, these will refine the market’s view on how justified December rate-cut expectations really are.

• If PPI and core PCE undershoot expectations while retail sales and GDP show only modest momentum, the narrative of a “soft landing with easing inflation” will remain intact. That keeps downward pressure on US yields, supports equities and encourages carry and risk-on trades, which normally favour GBP more than EUR.
• Conversely, a surprise upside in inflation or resilient spending could push yields back up, reduce the implied probability of a December cut and re-tighten global financial conditions. That environment is less friendly to cyclical currencies; the euro tends to outperform sterling in risk-off episodes, which would support EUR/GBP.

Because the cross is European, these US releases are a second-order driver – but they set the tone for risk appetite, which strongly influences how investors treat higher-beta currencies like GBP.

Euro-area: ECB communication and financial stability

On the euro side, the next meaningful signals come from:

• The ECB Financial Stability Review. It will provide an updated assessment of banking-sector resilience, corporate leverage and sovereign-spread risks. Underlying message is likely to be cautious: the ECB will acknowledge progress on inflation while reminding markets that growth remains uneven and that pockets of vulnerability persist.
• Multiple ECB speeches (Elderson, Lane, De Guindos and others later in the week) plus the account of the latest monetary-policy meeting. Recent commentary has framed risks to inflation as broadly balanced and emphasised that the current rate level is appropriate, reinforcing a “wait-and-see” stance.

For EUR/GBP, this means the ECB is unlikely to deliver any hawkish surprise that could significantly lift the euro. At most, a slightly firmer tone on inflation could slow euro downside, but investors will still view the ECB as closer to neutral than the BoE.

United Kingdom: Fiscal signal from the Autumn Statement

The real domestic catalyst for EUR/GBP is the UK’s Autumn Forecast Statement.

Key questions for markets:

• How much net fiscal easing will the government deliver and over what horizon?
• Will any tax cuts be credibly offset by spending restraint or future tightening measures, preserving fiscal sustainability in the eyes of investors?
• Does the Office for Budget Responsibility’s updated growth and inflation outlook materially change the BoE’s medium-term reaction function?

A modest, carefully targeted package—small tax relief combined with structurally prudent budgeting—would be sterling-supportive:

• It would not scare gilts investors;
• It could improve the growth outlook at the margin; and
• It would allow the BoE to maintain its cautious stance without pricing in aggressive cuts.

By contrast, an unexpectedly large, un-funded fiscal giveaway could lead markets to demand a higher risk premium on UK assets, weaken gilts and weigh on the pound, pushing EUR/GBP higher regardless of the current technical picture.

Medium-term macro analogy

Looking beyond this week, a useful way to think about EUR/GBP is in terms of relative “policy space” and growth potential:

• The euro area appears stuck in a low-growth, near-target inflation regime, with the ECB deliberately reluctant to either re-tighten or re-ease unless data force its hand. That caps upside for euro yields and, by extension, the currency.
• The UK has similar growth challenges but more persistent inflation and a central bank that fears a premature pivot. Provided fiscal policy remains broadly credible, markets will expect the BoE to keep policy tighter than the ECB over time, leaving a modest positive rate differential in favour of sterling.
• Global conditions—particularly the Fed’s shift toward the endgame of its easing cycle—act as a common background, modulating risk appetite but not decisively tilting the euro-pound balance either way.

In that analogy, EUR/GBP looks like a cross that should oscillate in a broad 0.87–0.89 range, with a mild bias toward the lower half as long as global risk sentiment remains constructive and the UK avoids severe idiosyncratic shocks.

Strategic positioning for FX traders

Putting the macro and technical pieces together, the tactical and strategic stance we favour is:

1. Treat the 0.8780 region as a short-term pivot rather than an absolute floor.
2. • Near term, some rebound is likely, but failure to reclaim 0.8810–0.8830 should be interpreted as confirmation that the uptrend is stalling.
2. Use rallies into resistance to gradually build a short EUR/GBP bias with a medium-term horizon.
3. • Preferred sell zones: 0.8800–0.8820 initially; add on strength toward 0.8840–0.8850 if macro data have not shifted decisively in favour of the euro.
   • Initial take-profit zone: 0.8765–0.8755; extended targets in the low-0.87s if the channel breaks and fundamentals evolve as expected.
3. Manage risk tightly around macro events.
4. • The UK Autumn Statement and ECB communications can shift the narrative abruptly; short-dated options around those events may be preferable to outright spot positioning for some strategies.
   • US data that materially change December Fed cut odds will influence global risk appetite; fading EUR/GBP rallies is most attractive when risk-on sentiment and lower US yields are intact.
4. For investors with longer horizons, view any spike above 0.8850 driven by temporary risk-off or UK-specific headlines as an opportunity to position for eventual re-normalisation back toward 0.87, assuming the euro area does not regain a clear growth advantage over the UK.

In other words, the cross now sits at a technically sensitive level that aligns with a subtle but meaningful macro tilt toward sterling. The immediate battle is about whether 0.8780 holds on this test. Over the coming weeks, however, the more important story is whether relative policy and growth dynamics validate a slow migration of EUR/GBP back toward the lower end of its recent range, as the market transitions from a US-centric rate-cut narrative to a more nuanced European balance.