GBP/EUR exchange rate week review: pound recovers after briefly dipping below 1.15 versus euro
14/07/2025 to 18/07/2025: The pound euro exchange rate endured a volatile week, dipping below 1.15 amid mounting speculation of a Bank of England interest rate cut. Hawkish inflation data offered some support, but a weakening labour market and lack of UK economic momentum limited gains.
Monday
The pound euro (GBP/EUR) exchange rate dropped to within a whisker of the 1.15 benchmark after Bank of England (BoE) governor, Andrew Bailey, hinted at an interest rate cut if the labour market weakens further.
The euro wavered amid the announcement of a fresh round of US tariff threats from Donald Trump.
Tuesday
Having briefly dipped below 1.15, the pound retraced some of its losses after the euro was undermined by its strong negative correlation with an upbeat dollar. A lack of UK economic data allowed the pound to capitalise on the single currency’s slide lower.
Wednesday
The pound was largely rangebound, despite the UK’s consumer price index reporting an unexpected rise in inflation in June.
Investors cautious response was likely due to risks surrounding the imminent jobs report and the BoE’s focus on the UK labour market.
Renewed political jitters in France pressured the euro. The forthcoming government budget may prompt a vote of no confidence in the Prime Minister, due to considerable opposition regarding the proposal to eliminate two public holidays to address the public deficit.
Thursday
The pound rose to around 1.157 versus the euro, despite data showing unemployment rising and wage growth slowing in May. However, investors focused on revised payroll figures, which were adjusted from –109,000 to –25,000, dampening bets on a BoE rate cut.
The euro was dented by growing fears that the EU and the US will fail to agree on a trade deal before the 1 August deadline. Investors are concerned that a 30% US tariff on EU exports may harm the Eurozone economy and prompt additional European Central Bank (ECB) support.
Friday
The pound drifted lower against the euro amid a UK economic data lull, finishing the week at around 1.153.
Its losses were limited, however, by analysts’ reaction to the hotter-than-expected inflation numbers and news of slowing wage growth earlier in the week. Having previously expected the BoE to reduce interest rates in both August and September, analysts removed the latter cut from their forecasts.
Looking ahead
The ECB is expected to leave its policy rates untouched on Thursday, with the deposit rate remaining at 2% - a move that could support the euro. Market participants will seek hints about future rate cuts, but analysts expect the central bank to avoid signalling for September's meeting.