GBP/EUR exchange rate week review: pound tests 1.16 level versus euro
25/08/2025 to 29/08/2025: The pound briefly broke above 1.16 against the euro before slipping back, as mixed UK data and dovish BoE commentary left the UK currency struggling for direction. Meanwhile, euro strength was underpinned by firmer German inflation and cautious ECB expectations.
Monday
The pound euro (GBP/EUR) exchange rate was subdued amid an empty economic calendar due to the bank holiday.
Tuesday
A UK data lull left the pound directionless in the 1.15 range. Comments supporting larger, more rapid interest rate cuts, from Bank of England (BoE) policymaker Catherine Mann, added to the uncertainty. Although she also cautioned that inflation risks remained tilted to the upside.
The safer euro firmed, trimming some of its earlier losses as the currency benefitted from its negative correlation with a weakening dollar and a cautious market mood.
Wednesday
The pound edged above the 1.16 benchmark against the euro after UK producer price figures for the second quarter showed a notable uptick, signalling persistent inflationary pressures. This strengthened expectations that the BoE will proceed cautiously with further interest rate reductions, supporting the UK currency.
The euro was undermined by Germany’s consumer confidence index for September, which revealed a sharper-than-expected decline in sentiment in the bloc’s largest economy.
Thursday
The pound slipped lower versus the euro amid a lack of UK economic data and persistent concerns around potential tax rises in the autumn budget.
The euro sidestepped underwhelming Eurozone data as the dollar pulled back, lending the single currency some support.
Friday
An ongoing lull in UK economic data left the pound adrift.
The euro was bolstered by reports of an uptick in German inflation that weakened the case for an ECB rate cut at its September meeting. This offset figures showing the number of unemployed people in Germany exceeded three million for the first time in a decade.
The pound euro exchange rate ended the week at around 1.155.
Looking ahead
Preliminary Eurozone inflation data for August is scheduled for release on Tuesday. Headline inflation is forecast to be 2.1% higher than in August 2024. This would represent a slight uptick from July’s reading of 2%. Core inflation is expected to be 2.5% higher year on year in August, above July’s 2.3% print. This would add weight to expectations that the ECB will keep interest rates on hold on 11 September, supporting the euro.