GBP/EUR exchange rate week review: pound tumbles against euro amid tax hike fears
03/11/2025 to 07/11/2025: The pound sunk against the euro as investors braced for potential tax hikes in the upcoming autumn budget. Despite a brief midweek recovery on stronger services data, sterling remained under pressure amid mounting speculation of further rate cuts and UK growth concerns.
Monday
The pound euro (GBP/EUR) exchange rate traded sideways as the absence of notable UK data left sterling subdued.
Ongoing concerns surrounding the upcoming autumn budget were offset by expectations that the Bank of England (BoE) would leave interest rates unchanged later in the week.
The euro also lacked a clear direction. Subdued single currency sentiment was reflected by the Eurozone’s final manufacturing PMI for October, which confirmed that factory activity was stagnant throughout the bloc.
Tuesday
The pound tumbled over half a percent against the euro to around 1.133, after Chancellor Rachel Reeves spooked markets with a speech laying the groundwork for big tax increases in the upcoming budget.
Expectations of tighter fiscal policy stoked concerns over slower UK growth, while also increasing the prospect of the BoE cutting interest rates further – factors that weighed on the pound.
The safer euro firmed amid a risk-off market mood. Its upside was capped, however, by an absence of data from the Eurozone and its negative correlation with a strengthening dollar.
Wednesday
The pound found some support from positive data, rising into the 1.13 mid-range.
The UK’s services PMI for October was revised higher, pointing to stronger activity in the powerhouse sector. However, ongoing concerns about the autumn budget later this month and caution ahead of the BoE’s interest rate announcement limited the pound’s gains.
The euro was subdued as upbeat German factory orders in September and an upward revision to the Eurozone’s services PMI were dampened by speculation of Russian involvement in drone activity in Belgium.
Thursday
The pound continued to retrace its losses from earlier in the week, despite the BoE’s dovish interest rate hold.
While the move was expected, it showed a split within the central bank’s Monetary Policy Committee, following a narrow 5–4 vote in favour of leaving rates unchanged. This fuelled speculation that the BoE could still action another cut in December.
The euro firmed slightly thanks to its negative correlation with the dollar. However, the single currency’s upside was limited by German industrial output and Eurozone retail sales, which both fell short of forecasts.
Friday
With no notable UK data scheduled, the pound continued to be pressured by persistent uncertainty surrounding Chancellor Reeves’s autumn budget.
The euro was undermined by key German data showing the nation’s trade surplus shrank to an 11-month low in September as imports surged.
The pound euro rate ended the week at around 1.137.
Looking ahead
UK unemployment accelerated in June and July but slowed sharply in August. Therefore, the labour market data for September – released on Tuesday – is particularly important as the BoE appears set to cut rates at its next meeting in December, following the split decision in November. Weaker data could seal the case for a rate cut, which would be a negative sign for the pound.
UK economic growth has remained stagnant over recent months. Any sign of growth when UK GDP figures are released on Thursday could support the pound.