The currency market has recently shown significant activity in the GBP to EUR exchange rate, with the pound (GBP) experiencing downward pressure due to a grim outlook on the UK economy. Analysts from KPMG predict a mere 1% growth for the UK in 2026, largely attributed to escalating unemployment and deteriorating consumer sentiment. This bearish sentiment has been reflected in the GBP's depreciation, reaching 7-day lows around 1.1377, which is about 0.6% below its 3-month average of 1.1448.
The euro (EUR) has found some support thanks to a decline in the US dollar (USD), which has allowed it to maintain strength despite disappointing Eurozone manufacturing data. Should the upcoming consumer price index data confirm rising inflation, expectations for monetary policy changes by the European Central Bank (ECB) could bolster the euro further.
Recent forecasts indicate that the Bank of England (BoE) may soon cut interest rates, enhancing the perception of the GBP as less attractive. The outlook worsened with concerns over a potential fiscal shortfall in the UK budget, prompting market participants to position themselves cautiously. With the euro gaining against the pound, the EUR has risen to its highest levels since May 2023 against the GBP, highlighting the divergence in economic prospects.
Additionally, fluctuations in oil prices will continue to have implications for both currencies. The current oil price is at $63.33, 2.4% below its 3-month average, indicating ongoing volatility that could affect the euro due to its correlation with energy prices. This relationship emphasizes the need for businesses and individuals engaged in international transactions to monitor these developments closely, as they may influence the GBP to EUR exchange rate in the near term.
In summary, the GBP is under pressure amid a bleak economic forecast and concerns over fiscal management, while the EUR is bolstered by external factors, particularly the strength of the USD and potential shifting monetary policies by the ECB. Traders and businesses are advised to keep an eye on upcoming economic data releases and geopolitical developments which may sway exchange rates further.
