GBP/EUR exchange rate week review: pound hits three-week high versus euro
The pound reached a three-week high against the euro, buoyed by stronger-than-expected UK PMI data, while the single currency faced persistent headwinds from weak German sentiment, falling Eurozone confidence, and a sharper-than-forecast contraction in private sector activity.
Monday
The pound euro (GBP/EUR) exchange rate traded without a clear direction amid fresh evidence of a notable decline in UK consumer sentiment.
In April, S&P Global’s consumer confidence index declined to its lowest level in 33 months, reflecting heightened concerns among households regarding inflation and future employment prospects.
The single currency was muted, despite signs of hotter inflation in Germany. The producer price index for March revealed input costs in the Eurozone’s largest economy surged by 2.5%, stoking expectations that consumer inflation may continue to rise as higher costs are passed on.
Tuesday
The pound firmed against the euro following the release of a mixed UK jobs report and weak German data.
While the UK unemployment rate unexpectedly dropped, underlying factors signalled softness in the labour market.
The euro was undermined by a disappointing German economic sentiment index for April, which fell sharply to -17.2 – its lowest reading since December 2022 and significantly below expectations for a more modest dip to -5.
Wednesday
The pound broke through the 1.15 benchmark after the euro was pressured by weaker consumer sentiment.
Eurozone consumer confidence declined more sharply than forecast in April. The index fell to -20.6, its lowest reading since December 2022, amid growing concerns over how the Iran conflict could impact the bloc’s economy.
The UK’s consumer price index for March failed to meaningfully alter expectations for Bank of England (BoE) interest rate hikes. Headline inflation rose from 3% to 3.3%, in line with projections, while core inflation ticked down from 3.2% to 3.1%.
Thursday
The pound climbed to three-week highs above 1.1540, supported by stronger-than-expected UK PMI data that indicated private sector activity strengthened in April despite disruption from the Middle East. The UK PMI manufacturing index strengthened to a 47-month high, and the services-sector index also improved to a 2-month high.
The euro was undermined by the Eurozone’s latest PMIs, which revealed a steeper-than-expected contraction in private sector output. The energy price crisis reduced overall activity in the bloc to its lowest levels since November 2024, raising concerns about the European Central Bank’s (ECB) ability to implement a rate hike.
Friday
The pound consolidated following the release of UK retail sales data showing volumes rose 0.7% in March, prompted by “panic at the pumps”. Motorists stockpiled amid rapid rises in petrol and diesel prices since the start of the Iran war.
The euro was dented by data showing German business morale fell more than expected in April. The Ifo Institute’s business climate index fell to 84.4 in April from 86.3 in March. This marked the lowest reading since May 2020, as the Iran war threatens the long-awaited recovery of Europe's largest economy.
The pound euro exchange rate ended the week around 1.154.
Looking ahead
The BoE is widely expected to leave interest rates on hold at 3.75% on Thursday. But with recent data raising concerns about the risk of second-round inflation effects, the Monetary Policy Committee (MPC) could talk tough in its accompanying statement – a hawkish prospect that could apply downward pressure to the pound.