GBP/EUR exchange rate week review: pound jumps higher versus euro on hawkish interest rate expectations
29/09/2025 to 03/10/2025: Despite political uncertainty and mixed UK data, hawkish comments from BoE policymakers injected strength into the pound euro rate. Meanwhile, the euro struggled amid renewed geopolitical tensions and soft labour market figures.
Monday
The pound euro (GBP/EUR) exchange rate was choppy after Bank of England (BoE) Deputy Governor Dave Ramsden indicated that UK inflation could remain elevated for some time.
The UK currency’s gains were capped by the Labour Party conference, with the prospect of a policy shift toward increased government spending causing market jitters.
The euro was supported by stronger-than-expected economic sentiment in the Eurozone and its negative trading relationship with the weakening dollar.
Tuesday
The pair traversed the 1.14 mid-range, with the pound unaffected by an upward revision to the UK’s year-on-year GDP growth between April and June. Concerns about potential tax hikes in the government’s autumn budget limited the UK currency’s upside.
A sharper-than-expected rise in German inflation for September failed to inject lasting strength into the euro.
Wednesday
The pound briefly jumped above the 1.15 benchmark on projections that the BoE will keep rates elevated for longer than most of its central bank contemporaries.
The euro nosedived, despite data showing Eurozone inflation accelerated from 2% to 2.2% in September. Applying downward pressure were mounting geopolitical concerns amid escalating EU-Russia tensions and recent drone activity in Nordic airspace. In response, Danish Prime Minister Mette Frederiksen cautioned that Europe faces its toughest moment since World War II.
Thursday
The pound drifted lower against the euro amid investor jitters ahead of the upcoming autumn budget. Reports suggested Chancellor Rachel Reeves could remove the two-child limit on child benefits, stoking concerns over how it would be financed.
The single currency faced headwinds after Eurozone employment data for August showed joblessness across the region edged up to 6.3%, overshooting forecasts of 6.2%.
Friday
Both the pound and the euro were subdued amid an absence of notable economic data from either economy.
The pound euro exchange rate ended the week at around 1.148.
Looking ahead
Eurozone retail sales figures hit the headlines on Monday. Sales volumes in the bloc have been volatile in recent months, with significant swings up and down, following a steady upward trend. Investors expect the data to show a rebound in August, which could boost the single currency.
Speeches from BoE and European Central Bank (ECB) chiefs Andrew Bailey and Christine Lagarde will be closely monitored for interest rate rhetoric.