Euro to Pound Rate Today: Security Fears Undermine Euro Support

February 20, 2025 - Written by Frank Davies

STORY LINK Euro to Pound Rate Today: Security Fears Undermine Euro Support

The Euro to Pound exchange rate (EUR/GBP) was seen trading at 0.8272 on Thursday, a 0.14 per cent decline on yesterday's close.

Wednesday's UK inflation data did not trigger a major shift in interest rate expectations, with most investment banks expecting a further Bank of England rate cut to be delayed until May.

Markets were focussing on geo-political and trade concerns with concerns surrounding European security amid the latest Ukraine developments.

There were further concerns surrounding European security following the summit between US and Russian officials in Saudi Arabia on Tuesday.

The Euro overall came under pressure amid security concerns.

The Pound to Euro exchange rate (GBP/EUR) hit 6-week highs close to 1.2100 before a retreat to 1.2075.

ING commented, “The euro continues to follow sentiment on the implications of Russia-US talks, and we are starting to observe some signs of relative underperformance of European currencies that we suspect will be exacerbated by Trump’s more transactional approach to European NATO allies.”

It sees scope for GBP/EUR to advance to 1.2175.

The Pound to Dollar (GBP/USD) exchange rate hit 2-month highs at 1.2640 before edging back below 1.2600.

According to Scotiabank, “spot’s inability to hold gains (and new cycle highs in particular) leave it looking prone to more softness. Support is 1.2580 and a daily close at or below here will point to more GBP losses ahead.”

The headline UK inflation rate increased to 3.0% from 2.5% previously, above consensus forecasts of 2.8% and the highest reading since April 2004.

The core inflation rate increased to a none-month high of 3.7% from 3.2% previously and in line with market expectations.

The goods inflation rate increased to 1.0% from 0.7%, with the services sector rate increasing to 5.0% from 4.4%.

The Bank of England will inevitably be uneasy over inflation trends, especially with stubborn services-sector pressures, and energy prices are set to increase again.

Rob Wood, chief UK economist at Pantheon Macroeconomics, commented, "The risks are pointed towards higher than expected inflation this year.”

He added, "We think the MPC would be 'brave' to keep cutting rates quarterly with wage growth around 6% year-over-year - at least double the rate consistent with inflation at target - stalling rather than collapsing jobs, and inflation well above 3%. We look for two more rate cuts this year, in May and November."

Uncertainty surrounding US trade policy also continued to unsettle European currencies as Trump threatened to impose 25% tariffs on imports of cars and semiconductors.

According to Scotiabank, “Moderate gains for the USD so far today suggest the rebound can extend a little more—but perhaps not too much—as markets await clarity on tariffs.”

Commerzbank commented, "Amid all this chaotic, childish back and forth of the presidential tariff announcements, let's not lose sight of what will ultimately come out of it: probably fewer tariffs than expected when he took office, but still substantial ones.”

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TAGS: Euro Pound Forecasts