The Federal Reserve and the European Central Bank are both expected to hold rates in October, cushioning the pound against new onslaught.
Concerns about stagflation in the UK and high energy prices are an existential threat to the GBP
Upcoming UK budget announcement will reveal the level of success of fiscal management and could impact the pound
The British pound’s been on a strong run. On Wednesday, sterling traded near $1.339, almost hitting a one-month high. So far this October, it’s gained almost 2% against the euro and close to 1% against the US dollar.
The pound’s now trading above 1.3400 against the dollar and testing multi-month highs near 1.1850 against the euro. This climb largely comes from changing expectations around central bank interest rates. The GBP/EUR performance against the this month is the best since May 2023. But can this upward trend last?
Where Is GBP Getting Its Strength From?
The pound’s gains stem from solid economic data and high expectations for Bank of England (BoE) interest rate hikes.
UK unemployment fell to 4.7%, and annual regular wage growth held steady at a healthy 3.7%. Strong wage growth like this supports continued consumer spending, which makes the central bank’s job of controlling inflation harder.
Economic growth played a part too. An unexpectedly strong UK GDP report helped pull sterling up from its year-to-date low of 1.3137 against the dollar. The economy grew 0.1% in August, according to data from the Office for National Statistics, exceeding the consensus forecast 0.1%
Will the Pound Hold After Fed and ECB Decisions?
Upcoming central bank meetings could bring some volatility. Most economists expect the Federal Reserve to keep interest rates steady, likely between 3.75% and 4.00%, at its late October meeting, though another hike in December is not out of the question.
The Fed’s decision comes on October 28th. Since an October rate hike now seems improbable, the commentary released with it will matter more than the rate decision itself. A hawkish statement from them could really boost the dollar and pressure GBP/USD.
Similarly, the European Central Bank is also expected to keep rates steady on October 29th. They’ll likely wait to review more economic data before making any policy changes in December.
The pound might hold its ground better against the euro, especially if worries about Eurozone fiscal policy persist. But technical signals hint the currency could be overbought after its strong run in September and October, possibly setting up a short-term correction.
Just a pause in rate hikes from both the Fed and ECB shouldn’t slow sterling’s upward climb much. Still, if there’s any strong sign of more tightening in December, that could shrink the interest rate gap that has helped the pound.
Potential Risks for Sterling
Even with recent gains, big risks remain. The upcoming UK Budget announcement will be a significant focus. If it hints at poor fiscal management or more government borrowing than expected, that could hurt the gilt market and push the currency down. Investors are still wary about debt sustainability given the recent volatility in bond yields.
Concerns about stagflation also persist. Inflation is now outpacing the BoE’s forecasts, and a slowdown in UK economic activity could cap any more gains for the pound.
Persistent geopolitical tensions keep impacting energy prices and complicating the inflation outlook. A big jump in oil or gas costs might force the BoE to hike rates more aggressively, which could then slow economic growth. Conversely, if the BoE holds back, it might erode trust in its inflation-fighting capabilities.
Additionally, the Chancellor’s upcoming budget also brings policy risks. Big tax increases or surprisingly low government borrowing could slow down domestic economic activity. That might prompt the BoE to hit pause on its monetary tightening cycle sooner than expected.
What recent UK data has most supported the pound?
Lower-than-expected unemployment at 4.7% and stronger wage growth of 3.7% recently made a Bank of England rate hike next month feel more likely.
What are markets expecting for the upcoming Fed and ECB meetings?
Markets largely expect both the Fed and ECB to keep rates steady in late October. Any further action will probably wait until December, depending on new data.
Why does the UK Budget pose a risk to sterling?
If the UK Budget signals weaker fiscal discipline or bigger borrowing, it could rattle gilt markets. This might undo recent currency gains, especially because debt sensitivity is still high.
The Pound-Euro could remain supported if BoE Governor Andrew Bailey reinforces rate hike expectations, while weaker Eurozone confidence may pressure the Euro.
The Pound Euro (GBP/EUR) exchange rate rose to a fresh 17-month high on Thursday following the UK’s latest inflation figures.
At the time of writing, GBP/EUR was trading at €1.1940, up 0.3% on the day and at its highest level since May 2025.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.192398 (+0.10%)
Pound to Dollar (GBP/USD): 1.3395 (+0.17%)
Euro to Dollar (EUR/USD): 1.123367 (+0.06%)
DAILY RECAP:
The Pound (GBP) attracted fresh support on Wednesday after the UK’s latest consumer price index fuelled Bank of England (BoE) interest rate hike bets.
September’s CPI figures showed headline inflation accelerating from 3.1% to 3.5%, above forecasts for 3.4%. Meanwhile, core inflation rose from 2.6% to 2.8%, also above expectations.
Paired with Tuesday’s unexpected drop in UK unemployment, the CPI figures boosted expectations that the BoE will raise interest rates four times over the next year, which supported Sterling.
However, GBP’s upside was capped by above-forecast government borrowing in September, which stoked fiscal concerns ahead of next week’s Autumn Budget.
Meanwhile, the Euro (EUR) continued to face pressure as protests and rioting in France and Italy, alongside unrest elsewhere in Europe, fuelled concerns about political and social stability across the region.
These tensions added to existing worries about France’s debt crisis, with mounting concerns over the country’s fiscal outlook and bond market pressures threatening to spill over into the wider Eurozone. Fears of contagion continued to weigh on the single currency, as investors remained wary that France’s financial difficulties could spread to other heavily indebted member states.
Near-Term GBP/EUR Forecast: BoE Comments to Prop Up the Pound?
Looking forward, new data from the Confederation of British Industry (CBI) could impact the Pound on Thursday. A deepening contraction in industrial orders and a decline in business confidence could put pressure on the Pound.
Sterling may attract support later in the session amid a speech from BoE Governor Andrew Bailey. If the Bank of England chief signals that interest rate hikes are on the horizon, demand for GBP could increase.
As for the Euro, the Eurozone’s preliminary consumer confidence index for October is out in the afternoon. EUR may stumble if the release shows a deterioration in morale this month, as expected.
Exchange Rates UK Research
Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-Euro could test €1.19 if French political and fiscal tensions persist, although weaker UK jobs data may limit Sterling’s upside. The Pound to Euro (GBP/EUR) exchange rate rallied on Monday, after France was rocked by violent protests over the weekend.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1891. Up around 0.3% from the start of Monday’s session.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.186886 (+0.07%)
Pound to Dollar (GBP/USD): 1.331202 (-0.14%)
Euro to Dollar (EUR/USD): 1.121592 (-0.21%)
DAILY RECAP:
The Euro (EUR) faced renewed selling pressure on Monday as a wave of civil unrest across France over the weekend exacerbated concerns about the country's deteriorating fiscal position and added to uncertainty surrounding its political outlook.
The unrest, which saw clashes with police, widespread looting and a fire that severely damaged the historic town hall in Limoges, has placed further pressure on President Emmanuel Macron's government.
The demonstrations come at an already difficult time for French policymakers, who are struggling to secure support for a 2027 budget aimed at reducing the country's sizeable deficit ahead of next year's presidential election.
The prospect of further political instability has raised doubts over whether the government can implement the spending reductions and fiscal reforms needed to restore confidence in France's public finances.
These fears have added to France’s bond-market woes, which EUR investors are growing increasingly concerned could spill over into the wider Eurozone.
While able to advance against the Euro, the Pound (GBP) was largely rangebound against its other peers on Monday ahead of a run of key UK data.
A heavy macroeconomic calendar is anchored by the latest domestic labour market and consumer price figures, followed later in the week by retail sales numbers and flash PMIs.
Traders will scour the upcoming prints for fresh clues on how domestic activity is weathering the recent climb in energy costs, and whether stubborn price pressures will force the Bank of England (BoE) to tighten monetary policy more aggressively.
Near-Term GBP/EUR Forecast: Weak UK Jobs Data to Drag on Sterling? Looking ahead, the Pound Euro exchange rate may take its cues primarily from the UK’s latest jobs figures on Tuesday.
Consensus forecasts point to another uptick in the unemployment rate for August alongside a cooling in wage growth. If confirmed, signs of domestic labour market slack could sap Sterling demand by tempering expectations of future interest rate hikes from the BoE.
In the meantime, it seems safe to assume that France’s political and fiscal headaches will continue to influence EUR sentiment, with headwinds against the Euro only likely to grow if the situation deteriorates further.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could remain supported if UK jobs and inflation data reinforce November BoE hike bets, while firmer Eurozone PMIs may offer the Euro some relief. The Pound to Euro (GBP/EUR) exchange rate accelerated to a fresh 16-month high last week, supported by surprisingly resilient UK economic growth.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1849. Up roughly 0.3% from the start of last week’s session.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.186015 (+0.20%)
Pound to Dollar (GBP/USD): 1.33301 (+0.44%)
Euro to Dollar (EUR/USD): 1.12394 (+0.23%)
DAILY RECAP:
The Pound (GBP) was a little erratic in the first half of last week as market participants digested competing economic signals.
Initial tailwinds arrived from the International Monetary Fund (IMF), which upgraded its 2026 growth outlook for the UK economy from 1.0% to 1.3%.
However, that optimism was quickly checked by remarks from Bank of England (BoE) Chief Economist Huw Pill, who dampened currency sentiment by questioning aggressive market bets on four quarter-point interest rate rises over the next twelve months.
Sterling then accelerated in the second half of the week courtesy of a surprise uptick in monthly GDP.
August's unexpected expansion not only reinforced expectations that the Bank of England (BoE) will lift borrowing costs in November, and was also seen as offering more fiscal headroom for Chancellor John Healey in his upcoming Autumn Budget.
The Euro (EUR) opened last week’s session on the defensive, as persistent concerns over France’s mounting debt crisis continued to weigh on EUR sentiment.
The uncertainty surrounding the country’s proposed budget and the approaching 2027 presidential election drove French borrowing costs higher, while the premium investors demanded to hold French government bonds over German Bunds remained elevated.
The Euro then found a much-needed reprieve in the second half of the week, drawing strength from its negative correlation with the US Dollar (USD) as the latter tumbled.
Although fears that France’s fiscal woes could morph into a wider Eurozone debt crisis ultimately capped the Euro’s upside potential.
Near-Term GBP/EUR Forecast: Markets Brace for Deluge of UK Data Turning to this week, movement in the Pound to Euro exchange rate is likely to be dominated by several top-tier UK macroeconomic releases.
Particular highlights are likely to be the UK’s latest labour market report and consumer price index, the final major economic barometers due before the BoE convenes for its November policy gathering.
Any indications of cooling inflation or labour market slack that cast doubt on the case for an imminent rate increase could see Sterling quickly surrender its recent gains.
Meanwhile, in addition to ongoing French debt concerns, the Euro will also be influenced by the Eurozone’s latest PMI figures, with the Euro potentially finding further relief if the bloc’s private sector continued to expand at a healthy pace this month.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could stay elevated if French debt fears persist, although weak UK GDP may limit Sterling’s ability to extend recent gains. The Pound Euro (GBP/EUR) exchange rate rose to a 16-month high last week as fears of a debt crisis in France weighed heavily on the common currency.
At the time of writing, GBP/EUR was trading at €1.1814, up 0.4% on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.181375 (+0.13%)
Pound to Dollar (GBP/USD): 1.323299 (+0.03%)
Euro to Dollar (EUR/USD): 1.120134 (-0.10%)
DAILY RECAP:
The Euro (EUR) started the week on the back foot as rising French bond yields stoked concerns about a debt crisis in the Eurozone’s second-largest economy, which could present contagion risks to the rest of the bloc.
Political instability in Spain added to the pressure on the single currency, after Spanish Prime Minister Pedro Sánchez called a snap election.
The Euro attempted to stabilise on Tuesday as French government bonds recovered somewhat, even as German factory orders slumped a startling 10% in August.
However, the bond market turmoil continued to plague the common currency through the week, pushing the Euro down to multi-month lows against many of its rivals.
Meanwhile, the Pound (GBP) faced modest pressure at the start of last week’s session as it suffered some profit-taking following its strong performance the previous week. However, an upward revision to the latest UK services PMI cushioned GBP.
Sterling attracted fresh support on Tuesday, thanks to expectations for a Bank of England (BoE) interest rate hike next month and the possibility of closer ties between the UK and the EU.
After a subdued session on Wednesday, the Pound gained ground in the latter part of the week thanks to hawkish comments from BoE Governor Andrew Bailey.
GBP then ended the week on uncertain footing amid a lack of UK data.
Near-Term GBP/EUR Forecast: UK GDP to Stifle Sterling? Looking forward, a number of Bank of England and European Central Bank (ECB) policymakers are due to speak throughout the week, including BoE Governor Bailey and ECB President Christine Lagarde on Wednesday.
Investors will be paying close attention to the speeches in an attempt to gauge the central banks’ next steps, which in turn could impact GBP/EUR. A more hawkish stance from the BoE could underpin the Pound.
In terms of data, the key UK release will be the British GDP figures for August, due on Thursday. An expected 0.1% contraction in growth could weigh on Sterling.
For the Euro, the Eurozone’s final consumer price index for September, due on Friday, could lend the single currency support.
However, EUR investors will be keeping a close eye on French bond markets. If debt crisis fears continue to swirl, the Euro could face further pressure.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could stay supported if French fiscal concerns persist, although rising UK gilt yields may limit Sterling’s upside. The Pound to Euro (GBP/EUR) exchange rate maintained a positive trajectory on Thursday, trading just below the 15-month high struck earlier in the week.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1806. A modest rise from the start of Thursday’s session.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.180062 (+0.03%)
Pound to Dollar (GBP/USD): 1.322954 (+0.12%)
Euro to Dollar (EUR/USD): 1.121089 (+0.09%)
DAILY RECAP:
The Euro (EUR) continued to face resistance on Thursday as renewed concerns over European energy prices and France’s deteriorating fiscal position weighed on sentiment towards the single currency.
Brent crude climbed back above $104 a barrel amid fresh supply concerns, adding to inflationary pressures across the Eurozone and contributing to another rise in regional bond yields.
France remained at the centre of the market’s concerns as investors continue to question the sustainability of France’s €3.5tn debt burden and the government’s ability to rein in its sizeable budget deficit, particularly as its government is seen as unlikely to push its spending cuts through parliament.
The Pound (GBP) traded with modest support on Thursday following a speech by Bank of England (BoE) Governor Andrew Bailey.
While the bulk of his speech focused on his calls for financial markets to better prepare for future fiscal shocks, he also touched on the need for monetary policy to focus on controlling target.
Bailey warned that inflation risks are set to rise the longer that energy prices remain elevated and that the BoE is 'fully committed' to returning inflation to target.
Near-Term GBP/EUR Forecast: Rising UK Bond Yields to Sap Sterling? Turning to the end of the week, amid the ongoing turmoil in France investors are also likely to keep at least one eye on the UK bond market amid a continued rise in borrowing costs.
If Gilt yields continue to appreciate it's likely to raise fresh concern about the fiscal headroom available to Chancellor John Healey in his upcoming budget, and potentially apply pressure to the Pound Euro exchange rate.
Meanwhile, EUR investors will look to speeches by European Central Bank (ECB) policymakers for fresh impetus on Friday, with the Euro potentially catching bids if a hawkish consensus strengthens ECB rate hike expectations.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro could consolidate near ten-week highs if UK data remains resilient, although stronger Eurozone releases may help the single currency recover. The Pound Euro (GBP/EUR) exchange rate strengthened last week, as growing expectations of a Bank of England (BoE) interest rate hike and stronger UK growth helped Sterling outperform the single currency.
At the time of writing, GBP/EUR was trading at €1.1765, its highest level in ten weeks and up 1.1% on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.175942 (-0.06%)
Pound to Dollar (GBP/USD): 1.3241 (+0.01%)
Euro to Dollar (EUR/USD): 1.12599 (+0.07%)
DAILY RECAP:
The Pound (GBP) started the week on a firm footing, with comments from Bank of England (BoE) Deputy Governor Dave Ramsden adding to speculation that interest rates could rise in November.
Sterling struggled to find a clear direction on Tuesday as a quiet UK data calendar left the currency without a fresh catalyst. Prime Minister Andy Burnham’s speech at the Labour conference also failed to spark much movement.
Midweek brought renewed support for the Pound, following an upward revision to UK GDP figures. The revised data showed the economy expanded by 0.5% in the second quarter, bolstering expectations of a November rate hike.
Sterling’s gains proved less consistent on Thursday, as the UK’s final manufacturing PMI was revised slightly downwards. However, the index still pointed to improving conditions across the manufacturing sector.
The Pound finished the week on a stronger note, finding support in Burnham’s comments about rebuilding the UK’s relationship with the EU and the prospect of rejoining the bloc.
The Euro (EUR) faced headwinds at the start of the week as a sharp rise in European gas prices fuelled concerns about the bloc’s energy outlook, while the US Dollar (USD) also exerted pressure on the single currency.
EUR extended its losses on Tuesday as the US Dollar continued to strengthen. Eurozone economic sentiment data offered little relief, with the index unexpectedly declining in September for the first time since April.
The single currency traded unevenly midweek as mixed German economic data saw weaker-than-expected retail sales temper the impact of a stronger-than-forecast inflation print.
The Euro came under further pressure on Thursday as a selloff in government bonds, particularly in France, raised fresh concerns about public debt across the Eurozone.
EUR remained on the defensive at the end of the week, despite Eurozone inflation climbing to a three-year high of 3.8% in September. However, steady core inflation of 2.5% supported expectations that the European Central Bank (ECB) would leave interest rates unchanged this month.
Near-Term GBP/EUR Forecast: Eurozone Data to Help EUR Recover? Looking forward, the only UK release due out this week is the final services PMI on Monday. Confirmation of a slowdown in the vital sector could dent GBP.
Meanwhile, the Eurozone services PMI could confirm an acceleration in services activity, which may support EUR.
Tuesday could see mixed movement in the Euro. German factory orders are forecast to have contracted in August, but Eurozone retail sales are expected to have rebounded in the same month.
Midweek EUR may receive a boost, as Germany’s industrial production figures are anticipated to show a strong recovery in August.
Finally, the ECB meeting minutes on Thursday could also underpin the single currency, if they show a hawkish bias amongst policymakers.
The Pound-Euro could face resistance if German inflation revives ECB hike bets, while UK GDP revisions may offer Sterling some direction. The Pound Euro (GBP/EUR) exchange rate edged slightly higher on Tuesday, although a lack of UK data limited Sterling’s success.
At the time of writing, GBP/EUR was trading at €1.1663, up marginally on the day.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.166066 (+0.06%)
Pound to Dollar (GBP/USD): 1.320995 (-0.33%)
Euro to Dollar (EUR/USD): 1.132865 (-0.39%)
DAILY RECAP:
The Pound (GBP) struggled to find a clear direction on Tuesday as a lack of UK economic data left the currency with little impetus.
Wider factors also failed to prompt a clear direction in GBP. Average diesel prices in the UK hit a new record high, which simultaneously boosted Bank of England (BoE) interest rate hike bets while also fuelling concerns about the UK’s cost-of-living crisis.
Additionally, the Labour Party Conference kept GBP investors hesitant. Rumours swirled around greater public control of energy, and what this could mean for other utilities, as well as how a national care service – a potential manifesto commitment at the next general election – could be funded.
Meanwhile, the Euro (EUR) slipped on Tuesday, with the single currency seemingly dented by its strong negative correlation with the US Dollar (USD), as the latter rose.
New Eurozone data failed to provide EUR with support. The bloc’s economic sentiment index unexpectedly declined in September, easing from 98.4 to 97.9, rather than rising to 99. This was the first decline since April, snapping a four-month winning streak.
Near-Term GBP/EUR Forecast: German Data to Lift the Euro? Looking forward, Wednesday’s session kicks off with Germany’s latest retail sales figures. An anticipated 2% recovery in August could see the single currency start the session on positive footing.
EUR investors will then turn their attention to Germany’s preliminary consumer price index for September, due in the afternoon. A forecast acceleration in inflation could boost the Euro amid increased bets on another interest rate hike from the European Central Bank (ECB).
However, movement may be limited ahead of the CPI figures for the Eurozone as a whole, due on Friday.
As for the Pound, the UK’s final GDP growth rate for the second quarter could influence the currency. Confirmation of a decent expansion could offer Sterling modest support, while GBP could slump or strengthen if the final result is revised lower or higher, respectively.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-Euro could remain under pressure if Eurozone inflation accelerates, while any UK GDP revision may drive Sterling volatility. The Pound Euro (GBP/EUR) exchange rate fell to a 12-week low last week as weaker UK data dented Sterling and upbeat Eurozone data supported the single currency.
At the time of writing, GBP/EUR was trading at €1.1615, down around 0.4% on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.162689 (+0.11%)
Pound to Dollar (GBP/USD): 1.324595 (+0.27%)
Euro to Dollar (EUR/USD): 1.139251 (+0.16%)
DAILY RECAP:
The Pound (GBP) began the week on a weaker footing after UK consumer confidence dropped to a three-year low.
Sterling then struggled after figures revealed a sharp rise in UK government borrowing in August.
GBP faced fresh selling pressure midway through the week as the UK services PMI fell more sharply than forecast, dropping to 51.7 in September from 52.5 in August.
The Pound remained subdued as further evidence of softer consumer spending emerged. The latest Confederation of British Industry’s (CBI) distributive trades survey showed retail order volumes had fallen to a record low in September.
Sterling recovered some ground towards the end of the week after Bank of England (BoE) Governor Andrew Bailey warned that persistently high energy prices could make it more difficult for the central bank to avoid raising interest rates. However, GBP remained lower overall.
Meanwhile, the Euro (EUR) faced modest headwinds at the start of the week after Germany’s regional election results rattled EUR investors.
EUR then wavered amid a lack of Eurozone data, with easing oil prices helping to soothe concerns about an energy crunch while a stronger US Dollar (USD) applied pressure.
The Euro subsequently found support as September’s Eurozone manufacturing and services PMIs both exceeded expectations, pointing to stronger-than-forecast activity across the bloc.
EUR extended its gains as Germany’s latest IFO survey showed business sentiment climbing to a three-year high in September.
However, the single currency came under pressure at the end of the week after German consumer confidence deteriorated more than expected.
Near-Term GBP/EUR Forecast: Eurozone Inflation to Propel Euro Higher? Looking ahead, EUR investors will likely focus their attention on the Eurozone’s latest consumer price index, due on Friday. September’s flash CPI is forecast to show that headline inflation accelerated from 3.2% to 3.5%, while core inflation rose from 2.4% to 2.6%. This could boost the Euro by fuelling bets on another European Central Bank (ECB) interest rate hike.
Meanwhile, the UK economic calendar is relatively quiet this week, with the final GDP figures and manufacturing PMI the main releases likely to attract attention.
Wednesday’s GDP figures are expected to confirm that the UK economy lost some momentum in the second quarter, while still maintaining a relatively solid pace of growth. A downward or upward revision could see Sterling come under pressure or strengthen, respectively.
Later in the week, the final manufacturing PMI could provide some modest support for GBP if it confirms that activity improved in September.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could stay under pressure if UK PMIs soften, while steadier Eurozone activity may give the single currency an edge. The Pound Euro (GBP/EUR) exchange rate wavered marginally lower on Tuesday as markets reacted to the UK’s latest government borrowing figures and Confederation of British Industry (CBI) data.
At the time of writing, GBP/EUR was trading at around €1.1650, having wobbled slightly lower through the session.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.166156 (0.00%)
Pound to Dollar (GBP/USD): 1.33623 (-0.05%)
Euro to Dollar (EUR/USD): 1.145842 (-0.04%)
DAILY RECAP:
The Pound (GBP) faced some pressure on Tuesday after the UK published its latest government borrowing figures.
The public deficit surged to £18.3bn in August, marking the second-highest August on record. The borrowing figure was well above market expectations for £15.7bn and the Office for Budget Responsibility’s (OBR) forecast for £14.8bn.
This raised concerns about the state of the public finances ahead of the Autumn Budget, with Chancellor John Healey facing a daunting challenge.
However, Sterling’s losses were contained by stronger-than-expected manufacturing data from the CBI.
A drop in oil prices also seemed to aid GBP. The sharp decline in crude prompted a drop in UK gilt yields, thereby lowering government borrowing costs. This helped to partially offset the concerns about the borrowing figures, as lower bond yields reduce the cost of servicing government debt.
Meanwhile, the Euro (EUR) was uncertain on Tuesday as a lack of data left the currency vulnerable to competing external pressures.
On one hand, political and geopolitical concerns pressured the single currency. Political uncertainty in Germany and simmering EU-Russia tensions generated headwinds.
However, the Euro was supported by the recent decline in oil prices as it eased energy security concerns across the bloc.
Near-Term GBP/EUR Forecast: PMIs in the Spotlight Looking forward, the preliminary PMI results for both the Eurozone and the UK are the focus for GBP/EUR on Wednesday.
In the Eurozone, manufacturing activity is forecast to have held steady in September while service sector activity is forecast to slow. Meanwhile, both manufacturing and services activity in the UK are expected to moderate.
If the releases print as expected, Sterling may find itself subdued against the Euro. However, any unexpected results may drive steeper movement in the Pound Euro pair.
Additionally, two speeches from European Central Bank (ECB) policymakers could influence the single currency. ECB Vice-President Boris Vujčić is due to speak in the morning, while Chief Economist Philip Lane is due to speak in the evening.
Vujčić is considered to be on the hawkish end of the spectrum, while Lane is seen as more dovish. As a result, mixed comments could muddle EUR’s directional bias.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could stay volatile around UK and Eurozone PMIs, with stronger services activity likely to support whichever side delivers the better data. The Pound Euro (GBP/EUR) exchange rate was volatile last week, fluctuating between a 19-day high and a two-week low, as the Bank of England (BoE) interest rate decision rocked Sterling.
At the time of writing, GBP/EUR was trading at around €1.16598, virtually unchanged on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.166203 (+0.20%)
Pound to Dollar (GBP/USD): 1.339468 (+0.29%)
Euro to Dollar (EUR/USD): 1.148572 (+0.09%)
DAILY RECAP:
The Pound (GBP) traded unevenly through the first half of last week, gaining against some weaker peers as markets looked ahead to key UK data and the BoE’s policy decision.
Tuesday’s UK jobs report showed unemployment holding steady rather than rising as forecast, although the figures still pointed to some underlying weakness in the labour market.
Sterling then softened on Wednesday as UK inflation figures offered little support. Headline inflation rose from 2.9% to 3.1% in August, while core inflation held at 2.6%, with both readings matching forecasts.
The Pound faced further pressure on Thursday after the BoE left interest rates unchanged. However, losses were limited by the decision to slow the pace of bond sales, which pushed UK borrowing costs lower.
The Pound regained some ground on Friday as UK retail sales beat expectations, rising 0.5% in August after falling 0.2% in July. Markets had forecast a further 0.5% decline.
The Euro (EUR) came under pressure on Monday due to its strong negative correlation with the US Dollar (USD), as the latter currency strengthened.
Germany’s latest ZEW sentiment index offered little encouragement on Tuesday. Although sentiment improved for a fifth consecutive month to its highest level since February, the increase fell short of forecasts.
The Euro wavered on Wednesday after Eurozone industrial production fell 0.1% in July. However, the decline was smaller than the 0.2% contraction expected.
The US Dollar’s continued strength kept pressure on the Euro on Thursday, while a slight downward revision to August’s finalised inflation figures also dampened sentiment. However, EUR was able to jump against GBP.
The Euro then gave back its gains on Friday as markets assessed comments from European Central Bank (ECB) President Christine Lagarde, who said the bank had yet to see any second-round effects from inflation and would continue setting rates on a meeting-by-meeting basis.
Near-Term GBP/EUR Forecast: PMIs Take Centre Stage Looking ahead, the Pound could come under pressure on Tuesday when the UK’s latest borrowing figures are released. A sharp rise in borrowing during August could reignite concerns over the UK’s fiscal position ahead of the Autumn Budget.
Wednesday will bring the UK’s preliminary September PMIs. If the figures point to another month of solid activity, particularly across the vital services sector, Sterling could find some support.
The Eurozone PMI releases are also due out on Wednesday. Similarly to the Pound, an improvement in activity in the bloc could underpin the single currency.
Before then, however, the Euro could face pressure. The Eurozone’s latest consumer confidence index, due out Tuesday, is forecast to show a deterioration in morale.
Year-end Pound-Euro forecasts differ at 1.15-1.16, while Crédit Agricole expects Sterling to strengthen towards 1.19 during 2027. The British Pound to Euro exchange rate (GBP/EUR) faces a year-end retreat towards 1.15 under ING's forecast, while Crédit Agricole expects Sterling to hold nearer 1.16 before recovering in 2027.
Friday's close of 1.1662 left the pair virtually unchanged over the week, despite a 0.25% fall on Thursday followed by a 0.20% rebound.
ING's December 2026 target of 0.87 for EUR/GBP translates to approximately 1.1494 for GBP/EUR.
Crédit Agricole forecasts 0.86 for the same date, equivalent to 1.1628, much closer to Friday's price.
Its stronger Pound Sterling forecasts develop during 2027:
DateCrédit Agricole EUR/GBP forecastGBP/EUR equivalent December 20260.861.1628 March 20270.861.1628 June 20270.851.1765 September 20270.841.1905 December 20270.841.1905 ING's weaker Pound call faces a more hawkish BoE Before Thursday's decision, ING argued that investors were expecting too much UK tightening:
"We expect these dovish risks to feed into a weaker sterling against the dollar and the euro."
The BoE delivered the expected 6-3 vote to hold rates at 3.75%, but warned that inflation risks had increased since July.
The tougher warning challenged ING's expectations for communication, yet Sterling fell after the announcement.
ING had flagged 41 basis points of tightening priced by December, so a single quarter-point hike could still disappoint those pre-meeting expectations.
The Eurozone shares Pound Sterling's energy problem Crédit Agricole sees limits to Pound Sterling's vulnerability against a Eurozone facing its own energy shock:
"We also believe that some negatives are already priced into the GBP, especially vs the EUR, however, given that the Eurozone would have to deal with the consequences from the negative energy supply shock in the wake of the Iran war as well."
Its published Bank Rate forecasts stay at 3.75% through June 2027 before declining to 3.25% by December.
We therefore read its 1.19 call as a recovery in Pound Sterling's relative appeal that can coexist with eventual UK rate cuts.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-Euro could come under pressure if UK jobs data weakens BoE expectations, while stronger German sentiment may offer the Euro support. The Pound Euro (GBP/EUR) exchange rate climbed on Monday, hitting a two-week high, as strength in the US Dollar (USD) weighed on the single currency.
At the time of writing, GBP/EUR was trading at €1.1681, up 0.2% on the day.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.168302 (+0.17%)
Pound to Dollar (GBP/USD): 1.34829 (-0.33%)
Euro to Dollar (EUR/USD): 1.15406 (-0.50%)
DAILY RECAP:
The Euro (EUR) came under pressure on Monday as the common currency suffered from its strong negative correlation with the US Dollar.
USD firmed ahead of the Federal Reserve’s interest rate decision later in the week, where the US central bank is expected to raise rates from 3.75% to 4%.
A lack of Eurozone economic data left the Euro struggling to attract support, exposing the currency to losses.
Meanwhile, the Pound (GBP) traded without a clear direction on Monday as GBP investors opted to wait on the sidelines ahead of a busy week.
While UK data was absent from the calendar on Monday, there was plenty on the docket for the rest of the week’s trade.
The UK’s latest labour market overview, consumer price index, Bank of England (BoE) rate decision and retail sales figures were all on the horizon.
This left GBP investors hesitant to place aggressive bets on Monday.
Near-Term GBP/EUR Forecast: Sterling to Stumble on UK Jobs Data? Looking forward, Tuesday’s session kicks off with the UK’s latest jobs data.
Markets expect British unemployment to have risen in the three months to July, from 4.9% to 5%. Meanwhile, wage growth (including bonuses) is forecast to have cooled.
If the latest data points to a softening labour market, it could pressure the Pound – particularly ahead of the Bank of England interest rate decision on Thursday.
As for the Euro, Germany’s latest ZEW economic sentiment index could support the single currency on Tuesday. Morale in the Eurozone’s largest economy is anticipated to have improved for the fifth consecutive month in September to hit a seven-month high.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro could build on recent gains if UK inflation strengthens BoE rate expectations, although softer jobs data may limit Sterling’s upside. The Pound Euro (GBP/EUR) exchange rate rose at the end of last week as stronger-than-forecast UK GDP lifted Sterling.
At the time of writing, GBP/EUR was trading at €1.1659, up 0.2% on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.166274 (0.00%)
Pound to Dollar (GBP/USD): 1.352603 (-0.01%)
Euro to Dollar (EUR/USD): 1.159765 (-0.01%)
DAILY RECAP:
The Pound (GBP) was steady at the start of the week amid a speech from Chancellor John Healey. During his first major address, he highlighted plans to encourage economic growth while assuring markets that he would maintain a responsible approach to the public finances. The comments provided some modest support for GBP.
Sterling struggled to establish a clear trend as the week progressed, with a lack of major UK data leaving it largely directionless.
Friday brought a stronger UK GDP reading, with the latest figures showing the economy expanded by 0.3% in July, beating expectations. The result boosted GBP, helping it end the week on stronger footing.
The Euro (EUR) struggled to attract support at the start of last week after Germany’s latest industrial production figures showed a shock contraction in factory output. The decline offset the boost from upwardly revised Eurozone GDP figures.
The single currency remained subdued on Tuesday, with Germany’s trade data offering little encouragement. Although the trade surplus widened to €21.3bn in July, its largest since August 2024, this was largely driven by a sharper fall in imports than exports.
EUR edged higher on Wednesday as the US Dollar (USD) softened, although anticipation ahead of the European Central Bank’s (ECB) interest rate decision limited the Euro’s gains.
The ECB’s decision on Thursday saw the Euro trade largely sideways. While the central bank delivered an expected rate hike, its guidance fell short of hawkish expectations, weighing on EUR. The single currency then remained subdued on Friday as a lack of Eurozone data and fading safe-haven demand limited movement.
Near-Term GBP/EUR Forecast: BoE Interest Rate Decision in the Spotlight Looking ahead, the UK’s latest labour market report will be the first major data point to watch this week. With unemployment expected to have risen in the three months to July, the Pound could come under pressure, especially if the figures also show wage growth losing momentum.
Wednesday’s UK consumer price index is likely to be the next potential boost for Sterling. The consensus points to both headline and core inflation picking up in August, with the headline rate forecast to rise from 2.9% to 3.1%.
The week’s biggest event could come from the Bank of England (BoE). With no change to interest rates anticipated, attention will instead turn to the bank’s guidance on what comes next. A more cautious message could drag on the Pound, whereas a more hawkish stance may lend GBP support. The employment and inflation figures released earlier in the week could play a part in shaping that message.
Rounding off the Pound’s agenda, UK retail sales are forecast to fall in August, which could put further pressure on GBP on Friday.
For the Euro, the key release is Germany’s ZEW economic sentiment index for September. A forecast improvement this month could boost the single currency.
Later in the week, speeches from ECB policymakers could influence EUR.
Pound Sterling’s GDP-driven gains face a policy test as ING expects no Bank of England hike, while the ECB’s inflation outlook points towards further tightening. The Pound to Euro (GBP/EUR) exchange rate ended the trading week near 1.1663, up 0.24% on the day, however analysts at ING still expect a retreat towards 1.15 in Q4 2026.
Its end-of-year Euro-Pound target of 0.87 converts to approximately 1.1494 GBP/EUR, around 1.4% below Friday’s close.
July’s growth surprise has therefore lifted Pound Sterling without persuading ING to abandon its cautious forecast.
The ONS recorded 0.4% monthly GDP growth after June’s 0.3% increase, with services, production and construction all expanding.
Yet consumer-facing services contracted 0.4%, showing that the improvement was uneven.
As our coverage of Friday’s GDP reaction highlighted, analysts disagree over how much pressure stronger activity puts on the Bank of England.
ING’s Francesco Pesole acknowledges the immediate currency response:
“GBP is a tad stronger on the back of that, but these monthly growth prints have not had much impact on BoE decisions.”
Image: Pound-to-euro exchange rate 24hrs to close The interest-rate gap behind ING’s forecast On Friday morning, ING put market expectations at 48 basis points of tightening by year-end and 110 basis points by July 2027.
The year-end figure amounts to almost two quarter-point increases.
“Our baseline is still that the Bank of England won’t hike at all, leaving sterling in front of a potential cliff-edge dovish repricing.”
At Exchange Rates UK Research we believe that gap explains why a positive growth release can coexist with a weaker Pound Sterling forecast: if investors remove anticipated hikes, GBP loses some of its expected yield support.
The Euro side also matters. Thursday’s ECB decision announced a quarter-point increase in the deposit rate to 2.50%, effective from 16 September.
Its projections put inflation at 2.5% in 2027 and 2.1% in 2028, above the 2% target in both years.
ING sees those projections as an argument for additional increases:
“Taken at face value, those forecasts already pointed to further tightening.”
The ECB itself has committed to assessing policy meeting by meeting, so further hikes remain conditional.
ING nevertheless retains its fourth-quarter currency calls:
“We continue to see upside room for EUR/GBP and downside for GBP/USD, with 4Q targets of 0.87 and 1.33.”
The main risk to that outlook is stronger UK inflation persuading the BoE to tighten after all, allowing Sterling to retain more of its interest-rate support.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound Sterling’s GDP-driven gains face a policy test as ING expects no Bank of England hike, while the ECB’s inflation outlook points towards further tightening. The Pound to Euro (GBP/EUR) exchange rate ended the trading week near 1.1663, up 0.24% on the day, however analysts at ING still expect a retreat towards 1.15 in Q4 2026.
Its end-of-year Euro-Pound target of 0.87 converts to approximately 1.1494 GBP/EUR, around 1.4% below Friday’s close.
July’s growth surprise has therefore lifted Pound Sterling without persuading ING to abandon its cautious forecast.
The ONS recorded 0.4% monthly GDP growth after June’s 0.3% increase, with services, production and construction all expanding.
Yet consumer-facing services contracted 0.4%, showing that the improvement was uneven.
As our coverage of Friday’s GDP reaction highlighted, analysts disagree over how much pressure stronger activity puts on the Bank of England.
ING’s Francesco Pesole acknowledges the immediate currency response:
“GBP is a tad stronger on the back of that, but these monthly growth prints have not had much impact on BoE decisions.”
Image: Pound-to-euro exchange rate 24hrs to close The interest-rate gap behind ING’s forecast On Friday morning, ING put market expectations at 48 basis points of tightening by year-end and 110 basis points by July 2027.
The year-end figure amounts to almost two quarter-point increases.
“Our baseline is still that the Bank of England won’t hike at all, leaving sterling in front of a potential cliff-edge dovish repricing.”
At Exchange Rates UK Research we believe that gap explains why a positive growth release can coexist with a weaker Pound Sterling forecast: if investors remove anticipated hikes, GBP loses some of its expected yield support.
The Euro side also matters. Thursday’s ECB decision announced a quarter-point increase in the deposit rate to 2.50%, effective from 16 September.
Its projections put inflation at 2.5% in 2027 and 2.1% in 2028, above the 2% target in both years.
ING sees those projections as an argument for additional increases:
“Taken at face value, those forecasts already pointed to further tightening.”
The ECB itself has committed to assessing policy meeting by meeting, so further hikes remain conditional.
ING nevertheless retains its fourth-quarter currency calls:
“We continue to see upside room for EUR/GBP and downside for GBP/USD, with 4Q targets of 0.87 and 1.33.”
The main risk to that outlook is stronger UK inflation persuading the BoE to tighten after all, allowing Sterling to retain more of its interest-rate support.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-Euro could recover if stronger UK services data supports Sterling, although rising borrowing costs and firmer ECB rate expectations remain key risks. The Pound Euro (GBP/EUR) exchange rate fell to a near two-week low on Wednesday as UK government bond yields rose to a 19-year high.
At the time of writing, GBP/EUR was trading at €1.1648, its lowest level in 13 days.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.1641 (-0.15%)
Pound to Dollar (GBP/USD): 1.3489 (-0.18%)
Euro to Dollar (EUR/USD): 1.158749 (-0.03%)
DAILY RECAP:
The Pound (GBP) was subdued on Wednesday as a lack of UK economic data left Sterling without much support.
Concerns about rising government borrowing costs saw GBP struggle against some of its stronger peers. British gilt yields rose again on Wednesday, hitting their highest level since August 2007.
This raised concerns about how higher borrowing costs could constrain the UK economy and prompt tighter fiscal policy from the British government.
Meanwhile, the safer Euro (EUR) attracted some support against the increasingly risk-sensitive Pound amid a risk-off market mood.
However, the common currency’s upside potential was limited by a lack of Eurozone economic data and geopolitical concerns.
EU politicians were preparing a response after Germany formally attributed the drone attack on Leipzig airport last month to Russia, stoking fears about rising tensions between Brussels and Moscow.
Near-Term GBP/EUR Forecast: PMIs to Support the Pound? Looking forward, the final Eurozone and UK services PMIs are due out on Thursday morning, potentially impacting the Pound to Euro exchange rate.
If the data confirms that activity in the British service sector accelerated in August, Sterling could enjoy support.
The Eurozone’s latest producer price index could also affect the pairing. A surge in producer price inflation in July could boost the Euro, if it fuels consumer price inflation expectations and leads to an uptick in European Central Bank (ECB) interest rate hike expectations.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could come under pressure if Eurozone inflation accelerates and reinforces ECB rate hike bets, while Bailey may weigh on Sterling. The Pound Euro (GBP/EUR) exchange rate wavered between a one-week high and a one-week low last week, amid turbulent trade.
At the time of writing, GBP/EUR was trading at €1.1664, down marginally on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.167684 (-0.07%)
Pound to Dollar (GBP/USD): 1.354083 (+0.05%)
Euro to Dollar (EUR/USD): 1.159631 (+0.12%)
DAILY RECAP:
The Pound (GBP) found some initial support on Monday after analysis from the Resolution Foundation thinktank indicated that UK productivity may have strengthened in recent years, rather than deteriorated.
With little in the way of domestic data to offer further direction, Sterling fluctuated as the week progressed.
The Pound climbed to a one-week high against the Euro on Tuesday before reversing course. A weaker-than-expected Confederation of British Industry (CBI) distributive trades survey and growing concerns over the cost of living, fuelled by rising energy bills, then dented Sterling.
As UK data remained thin for the rest of the week, the Pound continued to trade without a clear direction.
Meanwhile, the Euro (EUR) softened slightly at the start of last week amid a lack of data and EUR’s negative correlation with the US Dollar (USD), as the latter currency crept higher.
The common currency managed to attract some support on Tuesday, after Germany’s final GDP figures for the second quarter were revised slightly higher and the latest IFO business climate index rose more than forecast.
European Central Bank (ECB) expectations helped the Euro rise against the Pound through the latter half of the week, although the currency’s gains elsewhere were limited.
ECB policymaker Isabel Schnabel said on Wednesday that further interest rate hikes are likely, while the bank’s meeting minutes on Thursday reinforced this stance.
An improvement in Eurozone economic sentiment in August, published on Friday, helped the Euro stay afloat through the end of the week.
Near-Term GBP/EUR Forecast: Eurozone Inflation in the Spotlight Looking forward, EUR investors are likely to focus on the Eurozone’s latest preliminary consumer price index, due out on Tuesday.
The flash CPI is expected to show that headline inflation accelerated from 2.9% in July to 3.3% in August. If it prints as forecast, the Euro could strengthen as markets price in a more hawkish approach to interest rate hikes from the European Central Bank.
For the Pound, the UK’s final services PMI could provide some direction on Thursday. Confirmation of stronger activity in August may offer Sterling some support.
Attention could then turn to a speech from Bank of England (BoE) Governor Andrew Bailey on Friday. If the BoE chief maintains a cautious stance on the need for further interest rate hikes, the Pound could come under pressure.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-Euro could remain under pressure if ECB minutes reinforce September rate hike bets, while Sterling lacks fresh domestic catalysts. The Pound to Euro (GBP/EUR) exchange rate trended broadly lower last week as UK economic data failed to build confidence amongst GBP investors.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1665. Down roughly 0.2% from the start of last week’s session.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.168523 (+0.10%)
Pound to Dollar (GBP/USD): 1.36445 (+0.01%)
Euro to Dollar (EUR/USD): 1.16767 (-0.09%)
DAILY RECAP:
The Pound (GBP) was met by volatility last week as a series of UK economic releases painted an inconsistent picture of the domestic economy, leaving investors with little clarity over the outlook for Bank of England (BoE) monetary policy.
Sterling came under pressure at the beginning of the week after employment figures revealed that unemployment remained stuck at 4.9%, while wage growth slowed to its weakest level since late 2020 among private-sector workers.
The Pound failed to find much support from Wednesday's inflation figures either, with an acceleration in price growth doing little to strengthen expectations that the BoE will resume raising interest rates later this year.
Sterling subsequently attempted to recover, but its gains faded as a steep drop in retail sales undermined confidence in the UK consumer economy. Even a stronger-than-expected set of PMI readings offered limited support, leaving GBP exchanges subdued heading into the weekend.
The Euro (EUR) drifted higher through the first half of last week, with the single currency attracting modest support amid a stronger-than-expected improvement in German economic sentiment.
The Euro then really started to catch bids in mid-week trade as its inverse trade relationship with the US Dollar (USD) saw EUR demand jump as the 'Greenback' nosedived.
However, the single currency was unable to sustain its best levels, being pressured in the latter half of the week by fresh European energy price concerns.
Near-Term GBP/EUR Forecast: ECB Minutes to Offer Direction to the Euro? Turning to this week, the primary catalyst of movement for the Pound to Euro exchange rate may be the publication of the minutes from the European Central Bank's (ECB) July policy meeting.
If the minutes indicate that policymakers are open to tightening monetary policy in the short-term it's likely to bolster bets for a September rate hike and lift the single currency.
Meanwhile, with notable UK economic data set to dry up and UK parliament still in recess, movement in the Pound will likely be linked to wider market trends this week.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could retest recent highs if UK inflation strengthens BoE rate expectations, while softer German sentiment may keep the Euro on the defensive.
The Pound Euro (GBP/EUR) exchange rate rose to a 19-day high last week, but trimmed its gains towards the end of trade.
At the time of writing, GBP/EUR was trading at €1.1701, up around 0.2% on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.17017 (+0.04%)
Pound to Dollar (GBP/USD): 1.353854 (+0.04%)
Euro to Dollar (EUR/USD): 1.156972 (-0.01%)
DAILY RECAP:
The Pound (GBP) opened the week with gains, as Sterling edged higher despite no obvious catalyst behind the move.
With little in the way of fresh economic data on Tuesday and Wednesday, GBP lacked a clear source of momentum and drifted within a narrow range. However, it managed to firm against weaker peers.
Thursday’s UK GDP figures also failed to provide Sterling with a meaningful boost. While the British economy recorded solid growth during the first half of 2026, concerns are growing that this pace of expansion may prove difficult to sustain over the rest of the year.
The Pound again lacked direction on Friday, with GBP moving without establishing a firm trend.
Meanwhile, the Euro (EUR) weakened against the rising Pound on Monday as the currency’s inverse trading relationship with the rising US Dollar (USD) pressured EUR.
The common currency was then subdued through Tuesday and Wednesday, touching a 19-day low against the Pound midweek.
However, EUR regained some ground on Thursday thanks to better-than-expected Eurozone industrial production figures.
EUR ended the week without much support, with weaker-than-forecast German wholesale prices leaving the currency subdued.
Near-Term GBP/EUR Forecast: UK CPI Figures to Boost Sterling?
The Pound faces a busy run of UK economic releases this week, with the latest jobs figures due on Tuesday. A relatively robust labour market over the three months to June could provide Sterling with some support.
Wednesday brings the UK’s latest consumer price index figures, which could offer another boost to GBP. If inflation accelerated as expected in July, this could strengthen expectations for Bank of England (BoE) interest rate hikes and lend the Pound some upward momentum.
The week concludes on Friday with July’s retail sales data and the preliminary PMIs for August. Weak retail activity could weigh on GBP, although resilient services sector growth this month may help to cushion any losses.
Meanwhile, Germany’s ZEW economic index on Tuesday is the first major release for the Euro. A forecast deterioration in August could dent EUR.
A speech from European Central Bank (ECB) President Christine Lagarde on Wednesday and the bank’s latest meeting minutes on Thursday could then support the Euro if there are any hints of a coming rate hike.
The week closes with the Eurozone’s own PMI results. Subdued activity could mute EUR movement.
Exchange Rates UK Research
Our currency coverage draws on live market data, official economic releases and published bank research.
Pound-Euro could extend its recovery if UK services data confirms renewed growth, although weaker German releases may be needed to unlock a return towards €1.18. The Pound to Euro (GBP/EUR) exchange rate fell to a one-month low last week before recovering after the Bank of England's interest rate decision and renewed reassurance over the UK government's fiscal plans.
At the time of writing, GBP/EUR was trading around €1.1690, down approximately 0.2% over the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.168098 (-0.11%)
Pound to Dollar (GBP/USD): 1.347555 (-0.05%)
Euro to Dollar (EUR/USD): 1.153631 (+0.06%)
Image: GBP/EUR monthly returns WEEKLY RECAP:
The Pound (GBP) lacked support through the first half of last week, with the absence of major UK economic releases giving Sterling little to work with ahead of Thursday’s Bank of England policy announcement.
Sterling recouped some of its losses following the central bank’s decision, although its advance proved patchy as markets assessed the voting split and the tone of the accompanying guidance.
Policymaker Catherine Mann backed an interest rate hike alongside two other members, having voted to keep rates on hold at previous meetings.
At the same time, BoE Governor Andrew Bailey remarked that there was limited evidence to suggest inflation was becoming entrenched across the economy.
Although the Pound opened Friday’s session on the back foot, it recovered as the day progressed.
Chancellor John Healey helped steady sentiment after confirming the date of the Autumn Budget and reaffirming the government’s commitment to its fiscal rules.
Meanwhile, the Euro (EUR) firmed early last week as Germany’s latest IFO business climate index beat forecasts, rising for the third consecutive month to hit a five-month high.
The common currency then extended its gains thanks to a decline in the US Dollar (USD), with which EUR is negatively correlated, helping the single currency hit a one-month high against Sterling.
However, the Euro gave back some of its gains on Thursday despite stronger-than-forecast GDP figures.
Geopolitical tensions put pressure on the single currency after a Russian missile crashed in Poland.
Slightly hotter-than-forecast inflation data lent EUR support on Friday, although the Euro’s upside remained limited.
Image: Pound Sterling currency performance over the last 30 days Near-Term GBP/EUR Forecast: Final PMIs to Influence the Pairing? Looking ahead, the final UK and Eurozone services PMIs for July could influence the Pound to Euro exchange rate in the middle of the week.
Both currencies could attract support if the surveys confirm renewed growth in their respective services sectors, while any unexpected revisions could generate sharper movement.
UK economic data is then in short supply through the remainder of the week, potentially leaving Sterling without a strong domestic catalyst.
Meanwhile, slowing German factory orders and weaker Eurozone retail sales could weigh on the Euro on Thursday.
The single currency may then face additional pressure on Friday if German industrial production stalled in June.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Exchange Rates UK Research's latest August 2026 survey of major investment banks suggests the Pound to Euro exchange rate is trading above where most institutions believe it will settle over the medium term.
With GBP/EUR currently at 1.1694, close to its highest level in more than a year, the majority of banks expect the exchange rate to drift back towards 1.14-1.16 through 2027.
Only a handful of institutions forecast sterling strengthening beyond 1.19.
Image: GBP/EUR exchange rate forecasts chart - survey results August 2026 Latest Survey Suggests Sterling's Outperformance May Moderate The latest Exchange Rates UK Research poll reveals a more balanced outlook than recent price action would suggest.
Bullish forecasts from Bank of America, UBS and Credit Agricole see GBP/EUR holding between 1.18 and 1.20, implying Pound Sterling can maintain most of its recent gains.
However, the majority of banks - including Citi, CIBC, Goldman Sachs, HSBC, ING, MUFG, Natixis, Nomura, Rabobank, SEB and Scotiabank - expect the pair to ease back into the 1.12-1.16 region over the next 12 to 24 months.
Overall, the survey average points to modest Pound Sterling weakness from current levels rather than another sustained leg higher.
That outlook follows a strong rally.
Image: GBP to EUR exchange rate performance over last six months GBP/EUR has climbed steadily over the past four months, rising from around 1.14 in March to almost 1.17, with July marking a third consecutive monthly gain.
The pair is now trading at its strongest levels since mid-2025 after advancing around 2.5% over the period.
Image: GBP/EUR 5-year chart BoE Advantage Narrowing as ECB Turns More Hawkish A recurring theme across the latest forecasts is that the interest-rate advantage which has underpinned sterling may begin to narrow.
The Bank of England kept Bank Rate unchanged at 3.75% this week, but the decision was accompanied by a three-way split on the Monetary Policy Committee and fresh warnings that energy-driven inflation risks remain elevated.
Meanwhile, the European Central Bank has also paused, but policymakers continue to signal that another interest-rate increase remains possible if higher energy prices feed through into broader inflation pressures.
Eurozone inflation unexpectedly accelerated to 2.9% in July, reinforcing expectations that the ECB could tighten policy again later this year.
This has reduced expectations that UK interest rates will remain significantly above those in the Eurozone for an extended period.
GBP/EUR Outlook: Consensus Favours Gradual Retreat Rather Than Sharp Reversal The latest Exchange Rates UK Research survey suggests the pound remains fundamentally well supported, but that much of the recent good news may already be reflected in current exchange rates.
Rather than forecasting a sharp reversal, most banks expect GBP/EUR to gradually move back towards the mid-1.10s as monetary policy differences become less pronounced and Eurozone fundamentals improve.
For businesses and holidaymakers buying euros, today's exchange rate remains close to the strongest seen for more than a year.
If the latest survey proves accurate, these levels could represent some of the most favourable buying opportunities before GBP/EUR settles back towards longer-term equilibrium.
Pound-Euro could remain under pressure if the Bank of England maintains a cautious outlook while stronger Eurozone data supports the single currency. The Pound to Euro (GBP/EUR) exchange rate traded in a narrow range on Wednesday near a four-week low as investors awaited Thursday's Bank of England interest rate decision and key Eurozone economic data.
At the time of writing, GBP/EUR was trading around €1.1672, having recovered modestly from an earlier 26-day low of €1.1660.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.16603 (+0.03%)
Pound to Dollar (GBP/USD): 1.335352 (-0.10%)
Euro to Dollar (EUR/USD): 1.145213 (-0.13%)
DAILY RECAP:
The Pound (GBP) remained subdued as a quiet UK economic calendar and caution ahead of the Bank of England's policy announcement discouraged investors from taking fresh positions.
Although policymakers are widely expected to leave interest rates unchanged, uncertainty remains over how the Bank will respond to recent volatility in global energy markets and the potential implications for inflation.
This kept Sterling on the defensive as markets awaited further guidance from the Bank later in the week.
Meanwhile, the Euro (EUR) also traded in a relatively narrow range amid a lack of fresh Eurozone economic data.
With few immediate catalysts, investors instead turned their attention to Thursday's preliminary Eurozone GDP figures and Germany's latest inflation data, both of which could shape expectations for European Central Bank policy.
As a result, trading in the single currency remained subdued through Wednesday's session.
Near-Term GBP/EUR Forecast: Eurozone GDP and BoE Decision to Dent the Pairing? Looking ahead, Thursday is expected to provide fresh direction for the Pound to Euro exchange rate.
The Euro could strengthen if preliminary second-quarter GDP figures point to a rebound in Eurozone economic growth.
Later in the day, Germany's flash inflation figures for July could provide additional support for the single currency if price pressures accelerate ahead of Friday's Eurozone CPI release.
For Sterling, attention will centre on the Bank of England's interest rate decision.
While no policy changes are expected, investors will closely scrutinise the Bank's guidance. If policymakers continue to emphasise caution over further interest rate hikes amid ongoing geopolitical uncertainty, the Pound could remain under pressure.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound-Euro rate could remain rangebound until the Bank of England and Eurozone GDP provide fresh direction later this week. The Pound to Euro (GBP/EUR) exchange rate edged higher on Tuesday after recovering from a three-week low, although a lack of economic data and caution ahead of Thursday's key events limited Sterling's rebound.
At the time of writing, GBP/EUR was trading around €1.1695, marginally higher on the day.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.167084 (+0.02%)
Pound to Dollar (GBP/USD): 1.329842 (+0.09%)
Euro to Dollar (EUR/USD): 1.139457 (+0.07%)
DAILY RECAP:
The Pound (GBP) attempted to recover after slipping to multi-week lows against several peers at the start of the week, although the absence of fresh UK economic data limited Sterling's upside.
The Pound had come under pressure after falling global energy prices reduced expectations that the Bank of England (BoE) would adopt a more hawkish tone at Thursday's policy meeting.
However, Sterling appeared to enter oversold territory, allowing it to recoup some of its recent losses.
At the same time, easing energy prices helped pull UK gilt yields lower, reducing government borrowing costs and easing pressure on Prime Minister Andy Burnham as investors assessed the affordability of the government's cost-of-living measures.
Meanwhile, the Euro (EUR) also traded in a narrow range amid a quiet Eurozone economic calendar.
External market developments also offered little direction, with the US Dollar – against which the Euro is negatively correlated – trading broadly sideways through the session.
Near-Term GBP/EUR Forecast: Pairing Muted ahead of Eventful Thursday? Looking ahead, a quiet UK and Eurozone economic calendar on Wednesday may leave the Pound to Euro exchange rate confined to a narrow range.
Investors are also likely to avoid taking large positions ahead of Thursday's key events, including the Bank of England's interest rate decision and the Eurozone's preliminary second-quarter GDP figures.
As a result, both Sterling and the Euro may struggle to establish a clear direction until fresh catalysts emerge later in the week.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
The Pound to Euro (GBP/EUR) exchange rate fell to a 16-day low last week as concerns over the UK government's fiscal plans overshadowed stronger domestic economic data and weighed on Sterling.
At the time of writing, GBP/EUR was trading around €1.1708, down more than 0.4% over the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.171379 (-0.04%)
Pound to Dollar (GBP/USD): 1.334752 (+0.17%)
Euro to Dollar (EUR/USD): 1.13947 (+0.21%)
DAILY RECAP:
The Pound (GBP) came under pressure at the start of the week after Prime Minister Andy Burnham surprised markets by appointing former Defence Secretary John Healey as Chancellor.
Sterling remained on the defensive as concerns grew over the government's commitment to fiscal discipline, particularly after Burnham outlined proposals for a series of tax cuts.
These political developments drew attention away from several key UK economic releases, including the latest labour market figures and consumer price index.
The inflation data delivered a mixed picture and did little to shift Sterling. Headline CPI slowed from 2.8% to 2.6%, falling by more than expected, while core inflation unexpectedly held at 2.6% rather than easing to 2.5%.
Stronger UK data later in the week also had little impact on the Pound, despite June retail sales and the preliminary July services PMI both unexpectedly beating forecasts, as fiscal concerns continued to dominate sentiment.
Meanwhile, the Euro (EUR) initially weakened after German producer prices contracted by more than expected in June, weighing on Eurozone inflation expectations.
However, stronger German data on Tuesday helped lift the single currency, with the ZEW economic sentiment index rising from 10.5 to a five-month high of 26.3.
The Euro also benefited from a more cautious market mood later in the week, while the European Central Bank's interest rate decision had only a limited impact. Although policymakers warned inflation is likely to remain elevated, they also highlighted growing risks to the economic outlook.
The Euro climbed to a 16-day high against the Pound on Friday after stronger-than-expected Eurozone PMI data, with GBP/EUR remaining around those levels into the weekend.
Near-Term GBP/EUR Forecast: BoE Decision in the Spotlight Looking ahead, the Bank of England's interest rate announcement on Thursday will be the key event for Pound investors.
Markets broadly expect policymakers to leave interest rates unchanged, meaning attention is likely to focus on the Bank's guidance.
If officials indicate that further interest rate increases remain possible in the coming months, particularly following the recent rise in energy prices, Sterling could find renewed support.
Before then, political developments are likely to remain an important driver for the Pound.
Meanwhile, the Eurozone's preliminary second-quarter GDP estimate is due on Thursday, with stronger growth likely to support the Euro.
Friday then brings the bloc's preliminary July inflation figures, where a further increase in price pressures could also underpin the single currency.
Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.
Stronger UK retail sales and improving business activity support the pound, but GBP/EUR must break 1.1760 to revive July’s rally. The Pound to Euro exchange rate recovered on Friday after suffering three consecutive daily declines earlier in the week.
GBP/EUR traded at 1.1718 late on Friday, up 0.14% on the day but below the previous week’s close of 1.1763.
Sterling reached a July high of 1.1827 on July 15 before retreating as softer UK inflation encouraged some investors to take profits and the Euro received support from improving Eurozone economic data.
Despite the setback, GBP/EUR remains around 0.9% above the July opening level near 1.1610 and comfortably above the June close at 1.1610.
The pullback has also stopped close to 1.1700, suggesting buyers remain willing to defend the exchange rate above the former July consolidation zone.
Image: GBP/EUR chart showing July rally to 1.1827 and pullback towards 1.1700 The technical outlook is therefore constructive but no longer decisively bullish.
GBP/EUR has formed resistance between 1.1760 and 1.1780, an area containing several recent daily closes. A recovery above this zone would improve the prospect of another challenge to 1.1800 and the July high at 1.1827.
Initial support is located around 1.1700, followed by the July 14 low and earlier cluster of closes around 1.1725.
A sustained break below 1.1700 would expose the June high at 1.1623 and the July opening area between 1.1600 and 1.1610.
UK Economy Ends the Week on a Stronger Footing Friday’s UK data offered some encouragement after employment and inflation figures had raised questions over the strength of the economy earlier in the week.
The Office for National Statistics reported that retail sales volumes increased 1.0% in June, defying expectations for a 0.3% decline.
Sales were also 4.2% higher than a year earlier, with warm weather, promotions and stronger online demand supporting spending.
Non-store retail sales rose 4.4% during the month, while the proportion of sales made online reached its highest level since April 2021.
The figures followed a 1.2% monthly increase in May and meant retail sales expanded 0.6% during the second quarter.
UK business activity also strengthened during July.
The flash composite purchasing managers’ index rose to 52.1, its highest level since February and above the 50 threshold separating expansion from contraction.
Services activity benefited from hospitality, domestic tourism and improved consumer confidence, while business cost pressures showed signs of easing.
The combination of stronger retail spending and renewed private-sector growth provides a better starting point for the new government and should reduce immediate concern over a sharp economic slowdown.
However, the improvement may prove vulnerable if higher oil and gas prices squeeze household incomes during the second half of the year.
Softer Inflation Limits the Pound’s Recovery Sterling’s response to Friday’s data was positive but limited because the latest inflation report has reduced the urgency for further Bank of England tightening.
The UK consumer price index increased 2.6% in the year to June, down from 2.8% in May and below the Bank of England’s previous projections.
Monthly inflation was just 0.1%, while CPIH inflation declined from 3.0% to 2.8%.
The figures followed evidence that private-sector wage growth has slowed and vacancies have fallen to 712,000.
Together, these reports suggest that underlying domestic inflation pressures are easing, even though the renewed increase in energy prices threatens to push headline inflation higher later this year.
The Bank of England will announce its latest interest-rate decision next week.
Policymakers are widely expected to leave Bank Rate unchanged at 3.75%, but markets will focus on the vote split and any guidance concerning the remainder of the year.
A cautious statement that emphasises weaker wage growth and lower June inflation could weigh on the Pound, particularly if policymakers push back against expectations for further rate increases.
Pound Sterling would receive stronger support if the Bank concentrates on the inflation risks created by rising energy costs and signals that another increase remains possible.
For GBP/EUR, the decision will be important because the Pound’s interest-rate advantage over the Euro remains one of its main sources of support.
ECB Leaves the Door Open to Higher Rates The European Central Bank left its three principal interest rates unchanged on Thursday, keeping the deposit rate at 2.25%.
In its latest monetary-policy decision, the ECB warned that the full inflationary consequences of the energy shock had yet to emerge.
The central bank maintained a data-dependent, meeting-by-meeting approach and said it would monitor the duration of the shock and the risk of indirect or second-round effects.
That kept the prospect of another increase in September alive.
Money markets continue to see a strong chance of two additional ECB increases before the end of the year, although weak growth could restrict how far policymakers are willing to tighten.
The economic picture improved on Friday as the Eurozone composite PMI rose from 50.0 to 51.9 in July.
The reading was well above expectations for 50.3 and signalled the strongest expansion in five months.
New orders returned to growth, while the survey was consistent with quarterly economic growth of approximately 0.3%.
An ECB survey published on Friday nevertheless showed economists expect Eurozone growth of only 0.6% during 2026, down from an earlier estimate of 1.0%.
The same survey placed average inflation at 2.7% this year and 2.2% in 2027.
The Euro therefore benefits from the possibility of further ECB tightening, but the outlook is constrained by weak underlying growth and the risk that higher energy costs damage the region’s manufacturing economy.
What’s the Forecast for the Pound versus the Euro? The broader Pound-to-Euro exchange rate trend remains positive, but the failure above 1.1800 and three consecutive daily declines indicate that the July rally has entered a consolidation phase.
Friday’s rebound from 1.1700 is technically encouraging and suggests the correction has not yet developed into a more significant reversal.
The central forecast is for GBP/EUR to remain within a 1.1680–1.1780 range ahead of the Bank of England decision.
A break above the cluster of recent closes around 1.1760–1.1780 would suggest buyers are regaining control and expose 1.1800, followed by the July high at 1.1827.
A close above 1.1827 would confirm a fresh breakout and bring 1.1900 into consideration.
The downside risk would increase if GBP/EUR closes below 1.1700.
That would indicate the recent rebound has failed and expose 1.1620–1.1630, where the June high and former resistance are located. The July opening level near 1.1610 would provide additional support.
Stronger UK activity data and the Pound’s existing interest-rate advantage favour eventual recovery, but the Euro has gained support from a more hawkish ECB outlook and a surprisingly strong July PMI.
The Bank of England will therefore determine whether GBP/EUR can return towards 1.1800 or whether the correction extends towards the former breakout area above 1.1600.
After gaining over 1% past month, the British pound dropped 0.5% against the euro due to cooling UK inflation and wage growth Lowering expectations for Bank of England rate hikes narrowed the yield gap between the pound and euro, triggering recent short-term profit-taking Anticipation of a hawkish policy stance from the European Central Bank provided additional underlying support for the euro against the British pound The British pound saw a significant monthly increase against the euro, rising over 1% to reach levels near 1.1800, last seen in mid-July. However, the pound has since given back some of these gains, falling about 0.5% in the last five trading days and moving back towards 1.1715. Understanding these movements offers valuable insight for market participants.
The Month’s Rally Explained Two central banks did most of the heavy lifting here. In the Eurozone, June inflation cooled to 2.8%, reducing the likelihood of further interest rate hikes from the European Central Bank following their June increase to a 2.25% deposit rate.
Additionally, a more stable political environment in the UK under new leadership has boosted market sentiment and lessened previous concerns that had impacted the pound. Andy Burnham’s uncontested succession brought an end to the nation’s political uncertainty. This removed a risk premium previously built into the currency.
Why the Pound Lost Its Grip The UK’s latest Consumer Price Index (CPI) report showed headline inflation slowing to 2.6% year-over-year in June, below market expectations of 2.7%. While core CPI held steady at 2.6%, the slower headline figures, combined with slowing wage growth, tempered investor expectations for immediate rate hikes from the Bank of England (BoE).
As the British pound struggled for direction, the euro gained support. Investors were positioning themselves ahead of the European Central Bank’s (ECB) latest monetary policy announcement. Expectations that ECB policymakers would maintain a hawkish stance helped the single currency stay resilient.
What This Means Going Forward Looking ahead, the immediate focus will be on the ECB’s decision today and the BoE’s meeting on July 30. If the ECB maintains its current stance and suggests a potential September hike, it may not significantly affect the pound.
The BoE meeting, however, carries more weight. With a new Monetary Policy Report, the outcome could range from a cautious approach to signals of a potential rate increase, particularly as the number of dissenting votes favoring tighter policy has increased.
For the UK, slowing inflation combined with stable growth metrics suggests the BoE can prioritize economic stability without resorting to aggressive easing measures. This scenario could indicate confidence in the pound’s underlying strength, bolstered by the credibility of domestic policy.
In the Eurozone, persistent challenges related to energy costs and subdued growth forecasts highlight potential weaknesses, even with the ECB’s stated commitment to its 2% inflation target. The euro’s current softness relative to the pound may reflect investor preference for sterling, although both currencies face external pressures from global economic trends.
How Investors Might Position With two significant central bank meetings occurring closely together, this period presents heightened uncertainty for investors, making substantial directional bets less advisable. Those with substantial sterling transactions or exposure due in the next two weeks should account for this increased event risk.
For investors with a longer-term perspective, the current trends, including a more cautious ECB and a BoE possibly moving towards tightening policy, may continue to favor the pound. However, that view should be held loosely until both decisions land.
What key economic data release caused the pound to lose momentum against the euro over the last five sessions?
Softer UK headline inflation of 2.6% and cooling wage growth lowered market expectations for imminent Bank of England rate hikes.
How has the ECB’s upcoming policy announcement influenced the euro’s performance against the Sterling?
Anticipation of a hawkish rate hold by the European Central Bank provided support for the euro against the pound.
How should investors approach GBP/EUR right now?
Investors should avoid large directional bets until both central bank decisions land; the medium-term uptrend looks intact but near-term volatility is elevated.
The Pound to Euro (GBP/EUR) exchange rate climbed to a 13-month high last week as speculation over the UK’s next Chancellor boosted Sterling, although the pairing struggled to hold its strongest levels.
At the time of writing, GBP/EUR was trading at €1.1761, up around 0.2% on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.176261 (-0.11%)
Pound to Dollar (GBP/USD): 1.345377 (-0.17%)
Euro to Dollar (EUR/USD): 1.143775 (-0.06%)
DAILY RECAP:
The Pound (GBP) traded in a narrow range at the beginning of the week, with the absence of notable UK economic releases leaving Sterling without a clear direction.
Remarks from Bank of England (BoE) Governor Andrew Bailey added further pressure after he highlighted the UK's persistent weak growth, dampening confidence in the currency.
Sterling then climbed sharply in the middle of the week as attention turned to the race for Chancellor under incoming Prime Minister Andy Burnham.
Markets reacted positively after Shabana Mahmood replaced Ed Miliband as the leading candidate, with Mahmood viewed as the more fiscally prudent option.
Even so, the Pound was unable to hold on to those gains despite figures showing the UK economy returned to growth with a 0.1% expansion in May.
With GBP/EUR hitting a 13-month high, traders chose to lock in profits, causing the Pound to retreat.
Meanwhile, the Euro (EUR) drew some support on Monday amid bets on further interest rate hikes from the European Central Bank (ECB) following the latest rise in energy prices.
EUR remained supported on Tuesday, thanks to its strong inverse trading relationship with the US Dollar (USD), as the latter currency faced pressure.
An unexpected contraction in Eurozone industrial production, published on Wednesday, left the Euro exposed to losses against the Pound.
However, the single currency was able to recoup a large portion of these losses through the latter part of the week, mostly due to a sharp retreat in Sterling.
Near-Term GBP/EUR Forecast: High-Impact Events to Drive Volatility? Looking forward, the initial focus for GBP investors is the UK’s latest employment figures due on Tuesday.
If the report suggests the labour market remains resilient, with unemployment holding steady and wage growth remaining firm, the Pound could strengthen.
Wednesday's UK consumer price index may then weigh on Sterling if it indicates that headline inflation cooled in June.
The week concludes with June's retail sales figures and the preliminary July PMIs on Friday. Weaker consumer spending alongside a further contraction in the services sector could leave the Pound under pressure heading into the weekend.
As for the Euro, Germany’s ZEW economic sentiment index for July could support EUR on Tuesday, if it shows an improvement this month as expected.
The European Central Bank’s latest interest rate decision on Thursday could drive volatility, with the single currency potentially firming if the bank indicates that further rate hikes are likely.
Finally, the Euro could soften on Friday if the Eurozone’s latest PMIs report weak activity in July.
The Pound to Euro (GBP/EUR) exchange rate extended its recent rally last week, with Sterling repeatedly climbing to fresh one-year highs as fading UK political uncertainty and diverging central bank expectations continued to favour the Pound.
At the time of writing, GBP/EUR was trading at €1.1741, close to its highest level since June 2025 and up around 0.6% on the week.
Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.173789 (-0.05%)
Pound to Dollar (GBP/USD): 1.339 (-0.12%)
Euro to Dollar (EUR/USD): 1.14075 (-0.06%)
DAILY RECAP:
The Pound (GBP) extended its recent bullish run last week, as markets continued to unwind the political risk premium in GBP following the resignation of Prime Minister Keir Starmer three weeks ago.
Sterling’s impressive gains show just how heavily months of political uncertainty had been weighing on the UK currency. With it now looking almost certain that Andy Burnham will succeed Starmer with an orderly transition of power, renewed confidence has continued to lift the Pound.
GBP also drew support from growing expectations that the Bank of England (BoE) will raise interest rates. Fresh tensions in the Middle East triggered a spike in oil prices, which in turn prompted a rise in BoE rate hike bets.
Meanwhile, the Euro (EUR) found itself exposed to losses through the first half of the week, as the common currency suffered from its strong negative correlation with the rising US Dollar (USD).
This outweighed some positive German economic data, with factory orders and industrial production in the Eurozone’s largest economy both exceeding forecasts in May.
The Euro tried to put up a fight on Thursday, with a softening US Dollar providing EUR with fleeting support.
However, the single currency continued to refresh one-year lows against the Pound throughout the week.
Near-Term GBP/EUR Forecast: UK GDP in Focus Looking forward, the focus for GBP investors this week will be the UK’s latest GDP figures on Thursday. Markets expect the British economy to have recovered by 0.1% in May, which could offer GBP modest support.
However, more notable movement in Sterling is only likely if the GDP data beats or misses forecasts, in which case we could see big swings in the Pound.
Meanwhile, UK politics could continue to influence the currency. Andy Burnham could be formally confirmed as Labour leader on Friday, if no other valid candidates are nominated. This could underpin the Pound, if markets welcome the smooth, swift transition of power.
As for the Euro, an expected rise in Eurozone industrial production in May could support the single currency on Wednesday.
EUR could then face some pressure on Friday, if the Eurozone’s final consumer price index confirms that inflation cooled in June.
The GBP/EUR pair surged to a 52-week high of 1.171, gaining 1.3% over the month and over 2% year-to-date A restrictive 5.25% UK interest rate, sticky domestic service inflation, and political stability are driving the pound's strong outperformance Forecasts diverge on further gains, and investors should watch the BoE's July 30 decision and ECB's September meeting as key near-term catalysts. The GBP/EUR currency pair has reached a new 52-week high of 1.171. This follows a period of notable strengthening, with the pound increasing by 1.3% in the past month and by 0.3% over the last five trading days. Year-to-date, the pair has seen gains exceeding 2%.
Observers of foreign exchange markets will recognize that such shifts rarely occur in isolation. A combination of policy divergences, economic data, and sentiment adjustments appears to be at work.
The Interest Rate Story Still Matters Most Several factors are contributing to the sterling’s strength. Differences in monetary policy between the UK and the eurozone are a primary driver. The Bank of England recently maintained its Bank Rate at 3.75%, with a split vote indicating some members favored an increase.
In contrast, the European Central Bank raised its deposit rate to 2.25% following an uptick in eurozone inflation. Despite the ECB’s tightening, the UK’s higher interest rates continue to provide support for the pound.
Just a week before that, the European Central Bank had increased its deposit rate to 2.25%. This was their first increase since 2023. It happened after inflation in the eurozone jumped to 3.2% in May, largely due to an energy price surge caused by events in the Middle East. Even though the ECB is tightening its policy, the interest rate difference still gives the British pound a significant advantage, and this higher return continues to support the currency.
At the same time, political factors have unexpectedly come into play. The market’s worries about the upcoming UK political leadership changes have really calmed down. Financial firms seem reassured by the clear promises from the main political candidates to stick to current government borrowing limits. This stable political outlook is a stark contrast to the local budget disputes and economic slowdowns that are quietly affecting the major economies in the eurozone.
Key Risks to Watch The most important thing to look at next is the BoE’s decision on July 30th. Most people expect them to hold rates again, but if some members dissent and push for a hike like before, it could boost the pound even more. If the BoE keeps its firm stance during its upcoming policy review, the interest rate gap will definitely continue.
Investors should also consider UK economic growth figures. A sharper-than-expected slowdown could weaken the currency’s advantage. For those with euro exposure, the current levels present an opportunity, but potential exists for a return to the year’s mid-range.
Broader global economic indicators and changes in market sentiment may also indirectly affect these currency movements. It is advisable to monitor evolving economic data rather than assume a continuous upward trend.
Broader global developments, including US economic data and shifts in risk sentiment, may also influence cross rates indirectly. Overall, participants would benefit from staying attuned to evolving indicators rather than assuming a unidirectional trend.
What has driven GBP/EUR to 52-week highs?
A persistent UK-Eurozone interest rate gap and fading UK political risk are combining to lift sterling.
What should investors watch next?
Key events to watch in the near term are the Bank of England’s July 30 decision and the ECB’s September meeting.
How has the domestic British political landscape helped support institutional investor confidence in sterling this summer?
A stable political outlook and commitments to fiscal responsibility have helped bolster confidence among institutional investors in the pound.
