GBP/EUR exchange rate week review: pound traverses 1.15 range versus euro
18/08/2025 to 22/08/2025: The pound traded in a tight range against the euro as shifting sentiment over UK fiscal risks and Eurozone recession fears offset fleeting gains from stronger data and hopes of Ukraine peace progress.
Monday
The pound euro (GBP/EUR) exchange rate traded in a narrow range amid a lack of fresh UK data.
The euro was initially pressured by investor caution ahead of talks between US President Donald Trump, Ukraine’s Volodymyr Zelenskyy, and EU leaders. The single currency recovered following Washington’s announcement of support to enhance security, which was interpreted as a development in peace efforts.
Tuesday
The pound remained listless in the 1.15 range against the euro as rising bond prices raised new worries about the UK’s fiscal outlook.
The euro strengthened slightly amid cautious optimism regarding progress towards a potential Ukraine-Russia peace accord. Single currency sentiment was also supported by an unexpected rise in the bloc’s current account surplus.
Wednesday
UK inflation exceeded expectations, prompting investors to scale back bets on a Bank of England (BoE) interest rate cuts. However, the pound’s gains were limited by concerns that persistently high borrowing costs could prompt the government to announce tax increases.
The euro firmed after suggestions that Washington might offer air support as part of a wider postwar plan triggered renewed optimism around a potential Russia-Ukraine peace framework.
Thursday
The pound was pressured despite an upbeat UK services PMI. The stronger-than-expected performance in the powerhouse sector wasn’t enough to assuage market concerns about the ongoing decline in employment.
The euro was initially supported by the Eurozone’s manufacturing PMI, which signalled surprise growth in factory activity in August.
However, sentiment soon soured as hopes for a Russia-Ukraine peace breakthrough diminished. A strengthening dollar also applied pressure, alongside a sharper-than-expected decline in consumer confidence in the bloc.
Friday
With no major UK releases scheduled, the pound struggled to find a clear direction.
A larger-than-expected contraction in German GDP during the second quarter weighed on the euro. The bloc’s largest economy shrank by 0.3% between April and June compared to the first three months of the year, marking a fall back into recessionary territory.
The pound euro exchange rate ended the week at around 1.153.
Looking ahead
A dearth of economic data from the UK economy means figures from the German economy will be in sharp focus for investors – notably retail sales and inflation figures on Friday.
Meanwhile, euro investors will continue to monitor developments in the war in Ukraine.