Pound-to-Euro Steady as Dollar Weakness Offers EUR Rates Relief

– Written by


David Woodsmith

STORY LINK Pound-to-Euro Steady as Dollar Weakness Offers EUR Rates Relief

The Pound to Euro (GBP/EUR) exchange rate was little changed on Thursday, with a retreat in the US Dollar helping the single currency recover some ground following its recent decline.

At the time of writing, GBP/EUR was trading at approximately €1.1820, broadly in line with levels seen at the beginning of Thursday’s session.

A softer US Dollar (USD) provided some respite for the Euro (EUR) on Thursday, allowing the single currency to steady despite continued unease surrounding France’s public finances.

Dollar demand weakened during the European session as investors continued to reassess their positions following Wednesday’s hotter-than-expected US inflation figures.

A broader sell-off in artificial intelligence stocks also contributed to the ‘Greenback’s’ retreat.

However, lingering concerns over France’s debt burden limited the Euro’s recovery.

Investors remain sceptical about the government’s ability to secure parliamentary approval for its 2027 budget, particularly given the opposition facing its proposed spending cuts.

Although Sterling struggled to make headway against the Euro, it strengthened against several other major currencies on Thursday after the UK’s latest GDP figures exceeded expectations.

Monthly economic growth came in at 0.1% for August, slowing from July’s 0.4% expansion but comfortably avoiding the 0.1% contraction forecast by economists.

The unexpected resilience offered encouragement to Pound investors, reinforcing expectations that the Bank of England (BoE) could raise interest rates at its November meeting.

Markets were assigning a probability of more than 90% to a hike following the release.

Stronger-than-anticipated growth also provided some relief for Chancellor John Healey as he prepares to present his Autumn Budget later this month, although the wider challenges facing the public finances remain.

Near-Term GBP/EUR Forecast: Bailey Speech Could Set Sterling’s Direction

Attention now turns to a scheduled appearance by BoE Governor Andrew Bailey, whose comments could influence Sterling trading as the week draws to a close.

Any indication that policymakers are preparing to embark on a fresh period of monetary tightening could lend the Pound additional support, particularly if Bailey’s remarks strengthen expectations of further rate increases beyond November.

Meanwhile, the Eurozone’s final consumer price index (CPI) figures for September are expected to confirm that inflation accelerated to 3.8%.

However, the release may have a limited impact on the single currency if the European Central Bank (ECB) continues to signal caution over additional monetary tightening.

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