EUR/GBP drifts higher to near 0.8750 on UK fiscal concerns  

• EUR/GBP gathers strength to around 0.8745 in Friday's early European session. 
• Markets priced in ECB to hold interest rates steady until at least December 2025.
• BoE's Greene favoured caution on rate cuts. 

The EUR/GBP cross extends the rally to near 0.8745 during the early European trading hours on Friday. The Euro (EUR) strengthens against the Pound Sterling (GBP) as traders expect an end to the current rate-cutting cycle from the European Central Bank (ECB). Later on Friday, the ECB policymakers Piero Cipollone and José Luis Escrivá are scheduled to speak. 

According to a Reuters poll, a significant majority of economists surveyed expected the ECB to keep rates unchanged for the remainder of the year. Rising expectations that the ECB is done cutting rates could support the shared currency against the GBP. However, some financial institutions anticipate further cuts later this year or in early 2026 if conditions warrant. The ECB emphasized a data-dependent, meeting-by-meeting approach and is not pre-committing to a specific rate path.

UK businesses reported a loss of momentum and confidence ahead of possible new tax hikes in Finance Minister Rachel Reeves' next budget in November, which might drag the GBP lower and act as a tailwind for the cross.

Investors await fresh cues on whether the Bank of England (BoE) will cut interest rates in the remainder of the year. BoE policymaker Megan Greene said on Wednesday that risks have grown that inflation in the UK will prove stronger than the UK central bank has forecast, meriting a cautious approach to further interest rate cuts. BoE Governor Andrew Bailey last week emphasized a "gradual and careful" monetary easing approach. The cautious tone of the BoE might help limit the GBP's losses in the near term.