GBP/EUR exchange rate falls to 30-month low in November
The pound slumped by almost 1% against the euro on 4 November, after Chancellor Rachel Reeves signalled potential tax increases in the autumn budget. Her comments fuelled concerns over slower UK growth and raised the prospect of the Bank of England (BoE) cutting interest rates.
The pound firmed to around 1.137 on 6 November, despite the BoE’s dovish interest rate hold.
Although anticipated, the Monetary Policy Committee’s split 5–4 vote revealed division, prompting speculation that the BoE may cut rates in December.
An improving market mood helped the pound euro exchange rate briefly edge above the 1.14 benchmark on 10 November. However, investor confidence in the pound was tempered by uncertainty over the upcoming autumn budget.
The pound retreated into the 1.13 mid-range against the euro the next day after a disappointing UK jobs report strengthened BoE rate cut expectations. The euro firmed after swerving a surprise drop in German economic sentiment for November. Support for the single currency increased due to its inverse correlation with a declining dollar, together with growing confidence that the European Central Bank (ECB) has concluded its policy-easing cycle.
On 12 November, the pound fell to a more than two-year low against the euro, dropping 0.4% to about 1.131, after Prime Minister Sir Keir Starmer faced alleged leadership threats, raising concerns over increased borrowing.
The pound euro exchange rate sank to a fresh 30-month low the following day after weaker-than-expected UK growth data reinforced BoE rate cut expectations and increased pressure on Rachel Reeves ahead of the budget.
Having recovered into the 1.13 mid-range against the euro, the pound stumbled on 19 November as UK inflation slowed for the first time since March, adding fuel to expectations of a BoE rate reduction in December.
The pound euro exchange rate rebounded to the 1.13 mid-range the next day amid ongoing EU-China tensions and subdued Eurozone consumer sentiment. These factors outweighed concerns regarding the upcoming budget and increased market anticipation of a BoE rate cut following softer inflation.
The pound faced selling pressure on 21 November following a sharp drop in UK retail sales in the previous month. This was compounded by the UK’s S&P Global Composite PMI, which reported a steep drop in November amid weak service sector activity. The manufacturing PMI helped soften the pound’s decline, indicating an unexpected return to expansion. Meanwhile, the euro was bolstered by figures showing Eurozone business activity grew steadily in November.
On November 24, the pound euro exchange rate dropped to around 1.133 after former BoE Chief Economist Andy Haldane remarked that budget uncertainty is “the single biggest reason why growth has flatlined” during the second half of 2025.
The pound briefly rose above 1.14 against the euro the following day after reports surfaced that Rachel Reeves would not introduce additional taxes on banks in the budget.
The pound surged to a four-week high above 1.14 on 26 November after Rachel Reeves revealed her long-awaited autumn budget. Following a long period of speculation, markets generally reacted positively to the announcement. The UK currency’s gains were supported by the view that the government had found ways to increase fiscal flexibility without imposing heavy tax hikes that could hinder economic growth. This optimism was boosted by the Office for Budget Responsibility (OBR), which released projections showing better-than-expected economic growth for 2025 and a smaller budget deficit.
The pound euro rate drifted as traders continued to digest the budget and hopes for progress towards a Ukraine peace deal receded, ending the month around 1.141.
GBPEUR: 3-Month Chart
Looking ahead
Falling UK inflation has teed up a BoE interest rate cut on 18 December.
Influential data from the UK economy in December: Claimant Count Change (16 December), ILO Unemployment Rate (16 December), ILO Unemployment Rate (17 December), S&P Global Composite PMI (18 December), Retail Sales (19 December), GDP (22 December).
Economists and analysts anticipate that the ECB will hold interest rates steady at its next meeting on 18 December.