The Pound to Euro (GBP/EUR) exchange rate slipped to 1.1664 on Monday as renewed ECB rate-hike expectations gave the Euro the stronger footing.
UK markets were closed for the bank holiday, keeping Sterling-specific flows limited.
DAILY RECAP:
GBP/EUR fell around 0.2%, reversing Friday’s modest advance and moving back towards the lower end of its August range.
The Euro drew support from German inflation data.
Headline inflation accelerated to 2.9% in August, while energy inflation jumped to 10.5% as the renewed US-Iran escalation pushed Brent crude back above $90.
German two-year yields climbed to their highest level since July 2024 as markets strengthened bets on a September ECB hike.
Scotiabank’s latest G10 briefing said recent Eurozone data had “confirmed the need for renewed hawkishness from the ECB.”
Pound Sterling faced a less supportive rates backdrop.
Expectations for the next Bank of England hike have slipped into 2027, with markets pricing less than one full increase by December.
The contrast with the ECB has become more important for GBP/EUR.
ING’s Chris Turner has also maintained a medium-term bias towards Euro gains, previously targeting EUR/GBP at 0.88 later this year.
Near-Term GBP/EUR Forecast: Eurozone Inflation Takes Centre Stage
Tuesday brings UK manufacturing PMI, mortgage approvals and Nationwide house prices.
For the Euro, the main event is the Eurozone flash CPI release. Headline inflation is forecast to accelerate from 2.9% to 3.3%, with core inflation holding at 2.5%.
Thursday brings UK and Eurozone services PMIs, followed on Friday by UK construction PMI and remarks from Bank of England Governor Andrew Bailey.
German factory orders and Eurozone retail sales are also due Friday.
An inflation print at or above 3.3%, combined with cautious Bailey commentary, could push GBP/EUR towards 1.1600.
Softer Eurozone inflation and resilient UK activity would instead bring 1.1720 back into view.
In the near-term, we forecast that the Pound to Euro (GBP/EUR) exchange rate will trade within the 1.1600–1.1720 range.
Our currency coverage draws on live market data, official economic releases and published bank research.
