GBP/EUR exchange rate week review: pound soars versus euro following hawkish BoE rate cut
04/08/2025 to 08/08/2025: The pound rallied against the euro after the BoE's expected rate hike and accompanying forward guidance prompted investors to scale back bets on further cuts.
Monday
The pound euro (GBP/EUR) exchange rate drifted higher ahead of the Bank of England’s (BoE) interest rate announcement.
The euro softened following lacklustre Eurozone investor confidence figures that showed a sharp drop in morale in the wake of disappointment surrounding the recently agreed EU-US trade agreement.
Tuesday
The pound briefly edged above the 1.15 benchmark against the euro in response to an upward revision to the UK’s final services PMI for July – although the print still pointed to a deceleration in activity.
The euro was initially pressured by a downward revision to the Eurozone’s final services PMI, fuelling concerns over the bloc’s economic resilience. However, the single currency pared some losses thanks to its inverse correlation with a softening dollar.
Wednesday
The pound slipped into the 1.14 mid-range ahead of the BoE’s August policy decision. With a quarter-point rate cut priced in, investors were focused on the central bank’s forward guidance.
The euro edged higher due to a weaker dollar. However, its upside was limited by underwhelming German factory orders and retail sales numbers.
Thursday
The pound jumped to around 1.153 versus the euro, despite the BoE’s announcement of an expected quarter-point interest rate cut.
The vote revealed that four members of the nine-strong Monetary Policy Committee opted to hold borrowing costs steady in August. Moreover, the accompanying forward guidance showed the central bank upgraded its inflation projections, dampening expectations for future cuts – boosting the UK currency.
Meanwhile, the euro tumbled following a 1.9% drop in German industrial production for June, far worse than the 0.5% contraction projected by economists – another downbeat economic indicator that added to concerns over the health of the bloc’s largest economy.
Friday
The pound euro exchange rate traded without a clear direction in the absence of major economic releases from the UK or the Eurozone.
Tailwinds from the BoE’s hawkish rate cut the previous day continued to offer the UK currency modest support.
The pair ended the week at around 1.154.
Looking ahead
The UK unemployment rate rose to 4.7% in the three months between March and May, its highest level in four years. Figures scheduled for release on Tuesday are forecast to show the rate held steady in the three months to June – stabilisation that could support the pound if the print meets expectations.
Underlying UK GDP growth has remained subdued. The BoE estimates that growth will print at 0.1% for the second quarter on Thursday, significantly down from the 0.7% growth recorded in the first three months of the year.