EUR/GBP posts modest gains to near 0.8800 on BoE's dovish hold

• EUR/GBP trades in positive territory near 0.8790 in Friday's early European session.
• The BoE left the interest rates unchanged at 4.0%, as widely expected.
• Traders see a less than 50% possibility of further ECB rate cuts by July 2026.

The EUR/GBP cross trades with mild gains around 0.8790 during the early European session. The dovish pause from the Bank of England (BoE) weighs on the Pound Sterling (GBP) against the Euro (EUR). Traders will take more cues from the speech of the European Central Bank (ECB) policymakers later on Friday, including Joachim Nagel and Frank Elderson.

The BoE on Thursday decided to hold interest rates steady at 4.0%, citing caution ahead of the UK government's Autumn Budget in November. BoE Governor Andrew Bailey signaled that rate reductions are coming, with economists now pricing in a pre-Christmas rate cut. The UK central bank cautioned that future rate cuts "will therefore depend on the evolution of the outlook for inflation.

Traders will closely monitor the government's Autumn Budget, which is expected to announce tax changes on November 26. Mounting political pressures surrounding UK Finance Minister Rachel Reeves and concerns about UK fiscal risks  could drag the GBP lower and create a tailwind for the cross.

The cautious stance from the European Central Bank could support  the EUR in the near term. ECB President Christine Lagarde highlighted that the central bank is "in a good place" and further stated it will do whatever is needed to stay in such a favorable position. Meanwhile, ECB Governing Council member Boris Vujcic said on Thursday that current policy is "in a good place" and that "we feel that we have done our job" after lowering inflation to the ECB's target.

Traders see a less than 50% odds of further reductions by July 2026. A Morningstar analysis notes that swap markets are pricing in just a 25 basis point (bps) cut by September 2026.