GBP/EUR exchange rate week review: pound stumbles on soft UK inflation
17/11/2025 to 21/11/2025: The pound struggled for direction as cooling UK inflation, weak data, and nerves ahead of the autumn budget applied pressure. The euro found modest support from improving business activity, but broader economic uncertainty and EU-China tensions limited its gains.
Monday
The pound euro (GBP/EUR) exchange rate ticked higher, but its upside was capped by budget uncertainty as investors speculated about what Chancellor Rachel Reeves may announce.
The single currency was subdued, with its negative correlation with a strengthening dollar overshadowing an upgrade to the Eurozone’s economic projections in the European Commission’s spring 2025 forecast. The primary executive branch of the European Union caveated that the improvement was largely due to a temporary rise in demand as exports surged ahead of US tariff changes.
Tuesday
The pound traded sideways through 1.13 mid-range against the euro with investors cautious ahead of the forthcoming autumn budget.
There is growing concern that Chancellor Rachel Reeves's financial policies may not be positively received by markets. Additionally, increasing complexities within the tax system have the potential to further impede UK economic growth.
The euro traded without a clear direction amid an absence of Eurozone data.
Wednesday
The pound stumbled as UK inflation rate cooled for the first time since March to 3.6%, fuelling speculation that the Bank of England (BoE) will reduce interest rates in December. The UK currency’s downside was cushioned by a dip in UK gilt yields, potentially reducing pressure on Rachel Reeves ahead of the autumn budget.
The single currency ticked higher amid a risk-off market mood following the global equity selloff, helping it to swerve data confirming Eurozone inflation slowed to 2.1% in October.
Thursday
The pound euro exchange rate recovered to the 1.13 mid-range after the single currency was dented by persistent EU-China tensions and downbeat Eurozone consumer sentiment. This overshadowed uncertainty surrounding the autumn budget and rising expectations for a BoE rate cut amid softer inflation.
Friday
The pound faced selling pressure following a steep drop in UK retail sales in October. This was compounded by the UK's S&P Global Composite PMI, which reported a sharp drop to 50.5 from 52.2 in October, with overall business activity coming in lower than the 51.8 forecast. Weak service sector activity, which dropped to 50.5 from 52.3, prompted the slowdown. The pound’s downside was cushioned slightly by the Manufacturing PMI, which signalled the sector’s surprising return to expansion.
The largely underwhelming UK data intensified BoE rate cut expectations.
Meanwhile, the euro was buoyed by data showing Eurozone business activity grew steadily in November, as services expanded at the quickest pace in 18 months. Although weak demand caused the manufacturing sector to fall back into contraction territory.
The pound euro exchange rate ended the week at around 1.137.
Looking ahead
Chancellor Rachel Reeves unveils her long-awaited autumn budget on Wednesday, with bond market movements, growth concerns, and the political fallout all presenting risks for the pound.