GBP/EUR exchange rate touches 16-month lows in April
The pound euro exchange rate fell below the 1.19 level on 3 April after the UK’s services PMI disappointed. March’s finalised print reported slower growth in the powerhouse sector than forecast. Economists cautioned that the reading signalled stagnation in the UK economy during the first three months of the year.
The pound slid into the 1.17 mid-range against the euro the following day after the UK government threatened retaliatory measures against Donald Trump’s trade tariffs. This tempered optimism over a potential UK-US trade agreement.
The UK currency’s downward momentum saw it sink into the 1.16 mid-range on 7 April as doubts over a UK-US trade deal resurfaced. Meanwhile, the single currency drew support from investor caution amid persistent global uncertainty.
The pound euro exchange rate dived to 16-month lows in the 1.14 mid-range on 11 April amid tariff concerns and soaring UK bond yields before tentatively climbing on a strong UK growth reading. The GDP print for February showed the economy expanded by 0.5% in February. However, analysts warned that the figure didn’t account for the economic pressure caused by global trade tensions.
The pound euro rate edged above the 1.16 benchmark on 14 April, buoyed by an uplift in global risk appetite and speculation that the UK was nearing a breakthrough in trade talks with the US. Meanwhile, the euro traded on the backfoot ahead of the European Central Bank’s (ECB) interest rate decision.
The same favourable market conditions helped the UK currency to break through the 1.17 benchmark the following day. Its upside was limited, however, by cooler-than-forecast wage growth figures, prompting investors to raise bets on an interest rate cut from the Bank of England (BoE) in May. Data showed German economic sentiment dropped to a 21-month low in April as tariff concerns among manufacturers persist, placing the euro on the defensive.
The UK currency failed to cling onto its gains, dropping to a fraction above 1.16 on 16 April after UK inflation data missed forecasts. The consumer price index for March showed inflation cooling from 2.8% to 2.6%. This marked a three-month low and reinforced rate cut expectations.
The pound ticked higher against the euro on 17 April after the ECB actioned a widely expected interest rate cut. This was accompanied by warnings from central bank President Christine Lagarde about the impact of trade tariffs on Eurozone growth, which dented the euro.
An improving market mood and hopes that the UK may be less harmed by growing trade tensions than other countries helped the pound to rise to within touching distance of 1.17 on 22 April. Meanwhile, the single currency softened amid market optimism, a recovering dollar, and deteriorating consumer morale in the Eurozone.
The pair fluctuated between the 1.17 and 1.16 ranges the following day after PMIs pressured both currencies. A shock contraction in UK service sector activity followed weaker-than-forecast Eurozone PMIs.
The pound dropped into the 1.16 mid-range on 25 April, despite better-than-expected retail sales figures, after the safer euro benefitted from a pullback in the dollar.
The UK’s possible resilience to growing trade tensions helped the pound to climb into the 1.17 mid-range on 28 April. The Confederation of British Industry’s (CBI) latest distributive trades survey strengthened the UK currency’s tailwinds, as it beat forecasts to post at a six-month high in April.
The pound euro rate exchange ended the month at around 1.176.
GBPEUR: 3-Month Chart
Looking ahead
The BoE is poised to cut interest rates on 8 May after UK inflation fell more than expected in March, paving the way for the central bank to reduce borrowing costs to 4.25% – a move that could dent the pound unless it’s priced in.
Influential data from the UK economy in May: ILO Unemployment Rate (13 May), Average Earnings (13 May), GDP (15 May), Consumer Price Index (21 May), S&P Global/CIPS Composite PMI (22 May), Retail Sales (23 May).