Pound-to-Euro Rate Slips as UK Inflation Misses Forecasts

April 17, 2025 - Written by Frank Davies

STORY LINK Pound-to-Euro Rate Slips as UK Inflation Misses Forecasts

The Pound to Euro exchange rate fell back on Wednesday as cooler-than-expected UK inflation and a risk-off market mood both weighed on the pairing.

GBP/EUR traded at 1.16437 (+0.28%) at the time of updating this report.

Pound Sterling (GBP) faced headwinds on Wednesday, slipping against its stronger counterparts following the UK’s latest inflation report.

March’s consumer price index revealed that price pressures eased more than expected, with headline inflation falling from 2.8% to 2.6%, lower than the 2.7% anticipated. Core inflation also edged lower to 3.4%, matching forecasts.

The softer data reinforced speculation that the Bank of England (BoE) could continue cutting interest rates in May. Combined with underwhelming wage growth figures released on Tuesday, and lingering concerns about the economic impact of Donald Trump’s newly proposed tariffs, the case for an imminent rate cut appeared to strengthen, leaving the Pound on the back foot.

In addition, the increasingly risk-sensitive UK currency lost support amid a souring market mood.

The Euro (EUR) strengthened on Wednesday, finding support as risk-off sentiment gripped global markets and the US Dollar (USD) came under pressure.


Fresh concerns over escalating trade tensions between the US and China unsettled investors, after Nvidia revealed it expects a $5.5bn hit due to new restrictions on AI chip sales to China. The announcement added to worries that Washington’s aggressive approach to international trade could dent the global economy and trigger a US recession.

Not only did this sour the market mood, thereby boosting demand for the safe-haven Euro, but it also maintained the recent pressure on the US Dollar. As EUR shares a strong negative correlation with USD, this further supported the common currency.

Looking ahead, all eyes will be on the European Central Bank’s (ECB) interest rate decision on Thursday. A 25bps rate cut is largely priced in, so the focus will likely shift to the ECB’s forward guidance.
While the rate cut itself may not come as a surprise, any signals from the bank about future policy could still weigh on the Euro, especially if ECB President Christine Lagarde hints at further monetary easing to support the Eurozone economy.

If the ECB expresses concerns over EU-US trade tensions or the potential economic fallout from tariffs, the Euro could come under additional pressure. The risk is that the bank might take a more dovish stance, which would only add to the bearish sentiment surrounding the common currency.

Meanwhile, for the Pound, the rest of the week looks quiet on the economic data front, leaving GBP potentially without much direction. However, sentiment could shift quickly. The increasingly risk-sensitive Pound remains vulnerable to any negative changes in market mood, which could weigh on GBP while giving the Euro some support. That said, any positive developments surrounding a potential UK-US trade deal could offer a much-needed boost to Sterling.

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TAGS: Pound Euro Forecasts