The Pound to Euro (GBP/EUR) exchange rate traded with modest gains on Tuesday, refreshing the three-month high struck on Monday.
Pound to Euro (GBP/EUR): 1.15474 (-0.04%)
Pound to Dollar (GBP/USD): 1.34962 (-0.27%)
Euro to Dollar (EUR/USD): 1.16877 (-0.23%)
DAILY RECAP:
The Euro (EUR) remained on the defensive on Tuesday, trading with modest losses amid concerns over US territorial ambitions in Greenland.
Following the recent US military intervention in Venezuela, markets have begun to reassess comments made by Donald Trump regarding Greenland.
Trump has repeated claims that the US “needs” Greenland for national security, comments that followed the capture of Venezuelan President Nicolás Maduro, prompting investors to price a fresh geopolitical risk premium into the Euro.
Adding to the pressure on EUR exchange rates was the Eurozone’s latest PMI data, with December’s finalised figures revised lower.
Meanwhile, the Pound (GBP) faced headwinds on Tuesday following the release of the UK’s latest services PMI.
December’s finalised index showed activity edged up from 51.3 to 51.4, but this marked a notable downgrade from the preliminary estimate of 52.1, tempering earlier optimism.
The revised data highlighted persistent challenges for UK service firms, including rising input costs, weak international demand and broader economic headwinds.
The lacklustre PMI is likely to revive concerns over the UK’s growth outlook in the final quarter of 2025 and may encourage renewed speculation over how quickly the Bank of England could move to cut interest rates in 2026.
Near-Term GBP/EUR Forecast: Cooling Eurozone Inflation to Drag on the Euro?
Looking ahead to Wednesday’s session, the main catalyst for movement in the Pound Euro exchange rate is likely to be the Eurozone’s consumer price index.
December’s preliminary CPI is forecast to show inflation in the bloc continuing to cool, with annual inflation expected to ease from 2.1% to 2.0%.
Such a result could weigh on the Euro by raising doubts over whether the European Central Bank’s current easing cycle is truly over.
At the same time, with UK data in short supply, the Pound may struggle to find a clear directional driver through the second half of the week.
