June 30, 2025 – Written by David Woodsmith
STORY LINK Pound-to-Euro Rate Slips as UK Disposable Income Slumps
The Pound Euro (GBP/EUR) exchange rate fell on Monday as positive UK GDP was undermined by falling household incomes.
At the time of writing, GBP/EUR was trading at €1.1680, down over 0.2% on the day.
The Pound (GBP) found little momentum on Monday, even as official data confirmed that the UK economy expanded by 0.7% in the first quarter of 2025, in line with earlier projections.
While the solid Q1 performance initially offered some reassurance, analysts were quick to highlight warning signs that the pace of growth has since lost steam.
Adding to concerns, figures revealed a 1% drop in real household disposable income over the same period, casting a shadow over consumer spending power. This erosion of household finances ultimately limited any meaningful gains for Sterling, despite the headline GDP growth.
The Euro (EUR) edged higher on Monday, capitalising on its inverse relationship with the US Dollar (USD).
A brighter global market mood and mounting bets that the Federal Reserve could begin lowering interest rates by September weighed on the ‘Greenback’, opening the door for the Euro to advance.
This came in spite of disappointing figures from Germany, where retail sales dropped 1.6% in May, a stark miss considering forecasts of a 0.5% rise. Even so, the common currency managed to find traction, supported largely by the broader retreat in USD.
Attention now turns to the Eurozone’s latest consumer price index, due Tuesday, which is set to steer the Euro’s next moves. Economists anticipate that headline inflation ticked up slightly in June, rising from 1.9% to 2%, while core inflation likely held steady at 2.3%.
Such figures would keep inflation hovering near the European Central Bank’s (ECB) 2% target, potentially tempering expectations for imminent rate cuts and offering the Euro some underlying support.
However, a notable miss or beat on these inflation numbers could spark sharper shifts in the common currency, with a lower reading weighing on EUR and a stronger print lifting it. Markets will also keep an ear out for ECB policymakers’ comments in the wake of the data, which could add extra volatility.
Meanwhile, Sterling traders will be closely watching a speech from Bank of England (BoE) Governor Andrew Bailey. Following his mixed signals last week, any fresh hints on the UK’s monetary policy path could leave the Pound swaying once again.
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TAGS: Pound Euro Forecasts
