EUR/GBP traded slightly higher on Tuesday, with the British Pound (GBP) under pressure due to worries about the UK's deteriorating fiscal outlook and the Bank of England's (BoE) reluctance to raise interest rates, even as other major central banks move toward tighter policy [1]. Despite this upward movement, the currency pair remains confined within a narrow range, trapped between the 50-day and 100-day Simple Moving Averages (SMAs), maintaining a broadly neutral technical bias. At the time of writing, EUR/GBP was trading around 0.8580 [1].
According to strategists at Brown Brothers Harriman, the UK government borrowed £18.3bn in August, which is £2.9bn more than in August 2025 and £3.5bn above the Office for Budget Responsibility forecast. This increase in borrowing has sharply eroded the UK's fiscal space, with higher borrowing costs estimated to have halved the government's fiscal headroom to around £12bn. Chancellor John Healey is under pressure to raise taxes and cut spending to deliver his promised 'buffer against uncertainty' in the October 28 Autumn Budget [1].
Brown Brothers Harriman analysts suggest that a tighter UK fiscal squeeze implies the BoE may not need to raise the policy rate as much as markets expect, which is currently priced at 100bps in the next twelve months to 4.75%. They warn that GBP is vulnerable to a dovish BoE repricing [1].
Technical analysis shows EUR/GBP holding beneath the 100-day SMA at 0.8593 and the 200-day SMA clustered with the 78.6% Fibonacci retracement at 0.8641. The pair is marginally above the 50-day SMA at 0.8559 and the 50.0% retracement at 0.8578, but these supports have not triggered a decisive rebound. The Relative Strength Index (14) around 53 indicates mildly positive momentum, while the MACD is fractionally below zero with a flat profile, and the Average Directional Index remains low, suggesting subdued momentum [1].
CONCLUSION
The EUR/GBP pair is experiencing mild upward pressure as UK fiscal concerns and a dovish Bank of England outlook weigh on the Pound. Analysts warn that GBP could be vulnerable to further repricing if fiscal tightening persists and the BoE remains cautious on rate hikes. Technical indicators suggest the pair is trapped in a neutral range, with no clear breakout in sight.