GBP/EUR exchange rate week review: pound falls below 1.14 against euro amid slowing economy
08/12/2025 to 12/12/2025: The pound slipped below 1.14 against the euro as mounting evidence of a slowing UK economy, mixed BoE signals and weak GDP data weighed on sentiment, while the single currency found intermittent support from a softer dollar and shifting central bank expectations.
Monday
The pound euro (GBP/EUR) exchange rate initially wobbled as speculation resurfaced that Prime Minister Keir Starmer could face a leadership challenge early next year. The UK currency recovered into the 1.14 mid-range following a lift in UK gilt yields.
Euro tailwinds from an unexpected jump in German industrial output in October dissipated due to its negative correlation with a strengthening dollar.
Tuesday
The pound drifted lower after opposing comments from Bank of England (BoE) policymakers clouded the interest rate outlook. This was compounded by the BoE’s suggestion that the autumn budget might trim UK inflation by 0.5 percentage points, stoking expectations of slightly deeper rate cuts.
Growing unease over US-EU relations and ongoing anxiety around the Russia-Ukraine conflict unsettled euro investors.
Wednesday
In the absence of UK economic data, the pound euro exchange rate traded without a clear direction.
The single currency received minimal support from positive remarks on growth by European Central Bank (ECB) President Christine Lagarde, with its upside checked by persistent unease surrounding the Russia-Ukraine conflict.
Thursday
The pound dropped to within a whisker of the 1.14 benchmark as expectations of BoE rate cuts continued to loom large. New indicators of a slowing UK economy have increased speculation that the central bank could implement several interest rate reductions next year.
The euro inched higher due to its inverse trading relationship with a softening dollar. Further support came from an anticipated policy divergence between the European Central Bank and the Federal Reserve in 2026.
Friday
The pound slipped to a nine-day low against the euro after data showed UK GDP unexpectedly fell by 0.1% in October as consumers held back on pre-budget spending, and car manufacturing struggled to recover from the cyber-attack on Jaguar Land Rover.
The pound euro exchange rate ended the week around 1.138.
Looking ahead
Following a fourth consecutive month without growth, economists expect the sluggish UK economy to cement a BoE interest rate cut on Thursday – a view that’s reinforced by fading inflationary pressures and rising unemployment. The widely expected dovish move could dent the pound.