GBP/EUR exchange rate touches highest level since April 2022
The pound euro exchange rate dropped more than 0.5% below the €1.19 benchmark on 1 November. Applying the downward pressure was an underwhelming UK PMI print showing the manufacturing sector entered contraction territory (a reading below 50).
The pound benefitted from strong tailwinds on 6 November after confirmation Donald Trump would become America’s 47th president, propelling it above the €1.20 benchmark. Meanwhile, the euro faced headwinds generated by trade concerns in the wake of Trump’s comprehensive victory.
The Bank of England (BoE) lowered interest rates by 25 basis points to 4.75% on 7 November, a widely expected move that had already been baked into markets. Instead, it was the central bank’s accompanying forward guidance, which signalled a cautious approach to cutting interest rates, that impacted the pound. The hawkish view led investors to scale back bets on a follow-up reduction in December, lifting the UK currency to €1.203 – a nine-day high.
The pound euro rate edged above the €1.21 benchmark on 11 November, touching a more than two-and-a-half year high amid ‘Trump trade’ that pressured the single currency. This followed the Republican Party’s sweep of both houses of Congress, which has empowered Donald Trump to action his proposed policies when he takes office, including his plan to raise import tariffs – igniting concerns about the potential impact on the Eurozone economy given its significant goods export base.
The pair slumped from its highest level since April 2022 the following day in the wake of a downbeat UK labour market report for the third quarter, falling more than 1% to a whisker below €1.20. The unemployment rate increased to 4.3% from 4% the previous quarter, wage growth slowed to its lowest rate in more than two years, and the number of vacancies declined again.
The pound was dented on 15 November by data showing the UK economy stalled in the third quarter and contracted at the end of the period. GDP increased by just 0.1% as the service sector struggled, falling short of forecasts for a 0.2% rise and decelerating considerably from the 0.5% expansion posted in the second quarter.
The pound euro rate slipped to a 13-day low in the 1.19 mid-range on 19 November after the Kremlin threatened a nuclear response to Ukraine using US weapons to target Russian territory.
The pound rebounded to a five-day high above the €1.20 benchmark the following day after data showed UK inflation heated up more than expected to 2.3% in October from 1.7% the previous month. The sharp acceleration led investors to unwind bets on the BoE cutting borrowing costs in December.
The pound retreated into the €1.19 mid-range on 25 November as euro investors welcomed Donald Trump’s nomination for Treasury Secretary, Scott Bessent, which relieved concerns about US trade tariffs damaging the Eurozone economy.
The pound firmed against the euro as November concluded. News of rising inflation in the Eurozone was shrugged off by investors as it isn’t expected to prevent European Central Bank (ECB) rate-setters from lowering borrowing costs in December. Inflation in the bloc increased to 2.3% year-on-year in November, up from 2% in October.
The pound euro rate finished November at around €1.203.
GBPEUR: 3-Month Chart
Looking ahead
The pound firmed against the euro as November concluded. News of rising inflation in the Eurozone was shrugged off by investors as it isn’t expected to prevent European Central Bank (ECB) rate-setters from lowering borrowing costs in December. Inflation in the bloc increased to 2.3% year-on-year in November, up from 2% in October.
The pound euro rate finished November at around €1.203.