Pound to Euro Remains Weighed, UK Inflation up Next

January 14, 2025 - Written by Frank Davies

STORY LINK Pound to Euro Remains Weighed, UK Inflation up Next

The Pound to Euro exchange rate (GBP/EUR) continued to slip on Tuesday as the state of the UK’s bond market undermined the currency pairing.

GBP/EUR traded at around €1.1871, down roughly 0.4% from Tuesday’s opening levels.

On Tuesday, the Pound (GBP) saw a slight recovery from its recent losses, with smaller fluctuations against other currencies.

This uptick came as UK government bonds began to decline late on Monday, with the yield on the 30-year gilt dropping by 2 points after reaching its highest level since 1998 last week.

Although this helped Sterling move away from the multi-month lows it had reached earlier in the week, GBP exchange rates continued to face challenges in gaining significant ground against most other counterparts.

On Tuesday, the Euro (EUR) failed to capture much investor interest and traded largely flat against most of its peers, following remarks from European Central Bank (ECB) official Phillip Lane on Monday.

Lane addressed the potential easing of ECB monetary policy this year, and stated: ‘We also don’t want rates to remain too high for too long, because that would weaken the inflation momentum in such a way that the disinflation process would not stop at 2% but inflation could materially fall below target.’

Adding to the Euro's woes on Tuesday was a risk-on market sentiment, which further diminished the appeal of the safe-haven currency.

Looking ahead, the main factor likely to influence the Pound Euro exchange rate on Wednesday will be the release of the UK’s latest consumer price index (CPI).

This inflation reading has the potential to provide some relief to GBP exchange rates on Wednesday, with the UK’s headline inflation rate expected to increase from 2.6% to 2.7% in December.

If the data aligns with expectations, it could lessen the chances of an interest rate cut by the Bank of England (BoE), thereby boosting GBP exchange rates as a result.

For the Euro, the latest industrial production data from the Eurozone and Germany’s full-year GDP growth rate could both play significant roles on Wednesday, particularly if either figure deviates from market expectations.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts