GBP/EUR exchange rate week review: pound recovers from single biggest daily fall against euro since November
19/01/2026 to 23/01/2026: The pound recovered ground against the euro by the end of the week after suffering its sharpest daily fall since November, with shifting risk sentiment, mixed UK data and fluctuating expectations for central bank policy driving volatility.
Monday
The pound euro (GBP/EUR) exchange rate traded without a clear direction as investors warned that the threat of US tariffs from Donald Trump could erode UK GDP by as much as 0.7% over the coming years – potentially tipping the economy into recession.
The single currency edged higher due to its strong inverse relationship with a struggling dollar, despite the threat posed by proposed US tariffs. Trump has threatened to impose tariffs against European nations opposing his plan to acquire Greenland.
Tuesday
The pound recorded its single biggest daily drop against the euro since November, falling 0.56% into the 1.14 mid-range. The slump was partly prompted by UK unemployment data showing the rate unexpectedly remained at a multi-year high in November. However, the biggest trigger appears to have been linked to a selloff in stock markets in response to escalating geopolitical tensions.
The single currency was bolstered by its inverse correlation with the dollar and Germany’s ZEW economic sentiment index, which exceeded expectations to touch its strongest level in four and a half years.
Wednesday
The pound remained on the back foot versus the euro, as stronger-than-expected UK inflation figures failed to provide it with an injection of strength.
Headline inflation rose from 3.2% to 3.4% in December, but core inflation held at 3.2%, and services inflation rose less than expected. Investors still anticipate about 50 basis points of Bank of England (BoE) rate cuts this year.
An absence of high-impact data meant the single currency traded without a clear direction. European Central Bank (ECB) President Christine Lagarde stated that US tariffs are expected to have little impact on inflation and confirmed that price pressures are under control, but her comments did not improve market sentiment.
Thursday
The pound edged lower despite data revealing a limited rise in government borrowing last month, alongside a smaller-than-anticipated drop in the UK’s distributive trades index during January.
The euro firmed after Donald Trump ditched plans to implement fresh tariffs on European nations amid his Greenland stance. The single currency received further tailwinds from the ECB’s December policy meeting, where some rate-setters highlighted the potential for inflation to cool, strengthening the case for interest rates to be held steady.
Friday
The pound accelerated above the 1.15 level against the euro after data revealed the UK's economy grew in January. S&P Global's PMI survey of the private sector economy exceeded forecasts with all three components (composite, manufacturing, and services) coming in above 50 – the threshold that separates growth and contraction. This extended earlier gains that followed the release of a forecast-beating set of retail sales figures.
Meanwhile, the single currency was undermined by Eurozone PMI data that disappointed against expectations.
The pound euro exchange rate ended the week around 1.153.
Looking ahead
An absence of influential data from the UK economy means GDP data for both Germany and the wider European area on Friday will be closely monitored by investors.