GBP/EUR exchange rate week review: pound falls below 1.16 versus euro
30/06/2025 to 04/07/2025: The pound euro exchange rate plummeted below the 1.16 benchmark as hawkish central bank rhetoric and UK political uncertainty applied downward pressure.
Monday
The pound euro (GBP/EUR) exchange rate sank into the 1.16 mid-range despite news that the UK was home to the fastest-growing economy in the G7 in the first three months of the year. The UK currency declined following figures indicating that real household disposable income per head fell for the first time in nearly two years.
The euro was on the defensive after German inflation slowed unexpectedly last month, indicating easing price pressures.
Tuesday
Pound movement was uncertain as an absence of influential UK economic data and the potential for dissent among Labour MPs over proposed welfare cuts reduced its appeal.
The single currency rallied thanks in part to the Eurozone’s inflation figures which showed consumer prices edged higher in June, from 1.9% to 2% – the European Central Bank’s (ECB) target – prompting investors to scale back bets on an interest rate cut this month.
Wednesday
The pound tumbled into the 1.15 mid-range after a Bank of England (BoE) official suggested more aggressive monetary easing is required to tackle the UK’s ‘deteriorating’ economic outlook.
These losses accelerated amid political uncertainty, with reports suggesting Chancellor Rachel Reeves could face the sack following Labour’s U-turn on the welfare reform bill.
The euro edged higher amid a cautious market mood that boosted the single currency’s safe-haven appeal. However, these gains were limited by the Eurozone’s latest unemployment print, which reported an unexpected uptick in the jobless rate in May.
Thursday
The pound euro rate retraced some of its losses, edging above 1.16, after Prime Minister Keir Starmer supported Chancellor Rachel Reeves, quelling speculation she might be sacked. A stronger-than-expected final UK services PMI also buoyed the UK currency.
Meanwhile, the Eurozone’s final services PMI failed to lend the euro much support. The print was revised a fraction higher, but activity remained stagnant in May.
Friday
The pound drifted below 1.16 against the euro amid a lack of notable data from the UK economy and renewed UK fiscal concerns after the welfare reform bill passed with reduced cost-saving measures.
The euro was supported by the latest Eurozone PPI print and cautious comments from ECB President Christine Lagarde.
The PPI for May fell 0.6% MoM in May, easing price pressures and aligning with the ECB’s cautious stance.
Lagarde said the ECB’s current interest rate path is “in a good position” following a recent cut but emphasised that the Governing Council remains data-dependent and ready to act if inflation becomes more volatile.
The pound euro exchange rate ended the week at around 1.159.
Looking ahead
The Eurozone releases its YoY retail sales data for May on Monday. This is expected to slow to 1.5% from 2.3%, which could weaken the single currency if the forecast is accurate.
The UK’s GDP MoM for May hits the headlines on Friday. This is forecast to rebound to 0.2% after April’s contraction, which is likely to support the pound if it transpires.