The Pound-Euro could test recent highs if UK growth beats forecasts, while sparse Eurozone data may leave the single currency driven by external risks.
The Pound Euro (GBP/EUR) exchange rate traded sideways last week, hovering just below its recent 18-month high, as Sterling attracted support but the single currency resisted further losses.
At the time of writing, GBP/EUR was trading at €1.1981, virtually unchanged on the week.
Pound to Euro (GBP/EUR): 1.198598 (+0.01%)
Euro to Dollar (EUR/USD): 1.114 (-0.78%)
DAILY RECAP:
The Pound (GBP) strengthened on Monday as UK borrowing costs continued to decline following the previous week’s Autumn Budget.
Sterling gained further ground on Tuesday after the UK and EU reached an agreement to ease trade restrictions on food and animal products. However, a rise in UK gilt yields capped the currency’s advance.
The Pound then lost momentum midway through the week, with a downward revision to the UK’s final October services PMI putting pressure on Sterling.
Thursday’s 25bps interest rate hike from the Bank of England (BoE) helped the currency regain its footing. Although markets had anticipated an increase, the bank’s voting split and accompanying commentary struck a more hawkish tone than expected.
Meanwhile, the Euro (EUR) also enjoyed support early last week thanks to the currency’s strong negative correlation with a weakening US Dollar (USD).
USD weakness continued to support EUR through the first half of the week, helping to offset downwardly revised PMI figures.
The common currency continued to face mixed movement on Thursday and Friday. While positive Eurozone data supported EUR, a recovery in the US Dollar limited the Euro’s potential.
Near-Term GBP/EUR Forecast: Strong UK GDP to Boost Sterling?
Looking ahead, a speech from Bank of England Governor Andrew Bailey could influence the Pound on Monday. Any hawkish signals from the central bank chief may provide fresh support for Sterling.
Attention will then turn to this week’s key UK data release: the preliminary estimate of third-quarter GDP for 2026. Markets currently expect the UK economy to have grown by 0.7% in Q3, up from 0.5% in Q2. A stronger reading could reinforce expectations of further BoE rate hikes and lend the Pound additional support.
As for the Euro, notable Eurozone data is in short supply through much of the week, potentially leaving EUR exposed to external factors. US Dollar movement and concerns about France’s bond market could determine the common currency’s direction.
Friday then brings the second estimate for Eurozone GDP growth. Barring a revision to the preliminary figures, the data may have a limited impact on EUR.
Our currency coverage draws on live market data, official economic releases and published bank research.
