GBP/EUR exchange rate hits 2025 amid UK trade tariff optimism
The pound euro exchange rate was choppy at the start of February as US trade tariff threats pulled the pair back and forth. Markets were optimistic that UK trade relations will remain stable under Trump’s leadership, supporting the pound. Meanwhile, Trump declared that tariffs on the EU were imminent before delaying those proposed on Mexico and Canada. The last-minute decision gave the EU hope that his trade stance may be more flexible than initially feared, buoying the euro.
The pound plummeted into the €1.19 mid-range on 6 February after the Bank of England (BoE) announced a 25-basis point interest rate cut. Despite being widely expected, investors were flustered by the unexpectedly dovish split within the Monetary Policy Committee and the central bank’s UK growth forecast downgrade.
The UK currency retraced its losses the following day, rising above €1.20 after BoE Chief Economist Huw Pill suggested that the central bank isn’t ready to declare ‘job done’ on inflation. His hawkish comments cooled expectations for further rate cuts, providing the pound with support following the dovish monetary policy decision.
Another choppy period followed between 10 and 14 February, with the pound euro rate fluctuating between the €1.19 and €1.20 levels notable amid political and economic forces – from bets on further BoE rate cuts and concerns about the economic impact of tariffs on the EU to a surprise increase in economic growth in both the UK and Eurozone at the end of 2024.
The pound climbed into the €1.20 mid-range on 17 February after the euro was undermined by European Central Bank (ECB) policymaker Fabio Panetta, who said the ECB should not hold back on rate cuts. Panetta cited easing inflation risks for her dovish stance.
The UK currency maintained its upward momentum the next day, falling a fraction short of the €1.21 benchmark following the release of upbeat UK jobs data. The unemployment rate came in lower than expected in the last three months of 2024, and pay growth accelerated to an eight-month high.
The pound euro exchange rate slid into the €1.20 mid-range on 24 February as investors in the single currency celebrated the result of Germany’s federal election, which provided a path to political stability.
Deteriorating German consumer confidence helped the pound euro rate to climb to within a whisker of the €1.21 benchmark on 26 February.
The pound edged above €1.21 the following day, hitting a 2025 high, amid further UK trade optimism after Donald Trump said there’s a “very good chance at arriving at a very good deal”. Conversely, the single currency was undermined by the US president who threatened the EU with tariffs of up to 25%.
The pound euro exchange rate ended February at around €1.211.
GBPEUR: 3-Month Chart
Looking ahead
The next BoE monetary policy decision is scheduled for 20 March, with economists expecting the central bank to keep rates on hold against a backdrop of higher-than-expected inflation – a hawkish move that could lend the pound some support.
Influential data from the UK economy in March: ILO Unemployment Rate (20 March), Average Earnings Excluding Bonus (20 March), S&P Global/CIPS Composite PMI (24 March), Consumer Price Index (26 March), GDP (28 March).
With inflation hovering close to the ECB’s 2% target, economists widely expect the central bank to trim its deposit rate again on 6 March to 2.50%, potentially undermining the euro.