Noticias de la Cámara
GBP/EUR rallies amid BoE’s hawkish shift
01/09/2025
The pound euro exchange rate rebounded from an almost two-year low through August, aided by a surprisingly hawkish turn by the Bank of England (BoE).
What happened last month?
After suffering one of its weakest months in nearly two years in July, the pound managed to rally through August as markets trimmed their bets on more BoE interest rate cuts.
While the BoE cut rates at its August meeting, the decision was surprisingly close. The bank also upwardly revised its inflation projections.
Stronger-than-expected GDP figures and jobs data added to Sterling’s gains, along with a rise in UK inflation in July, with markets expecting the BoE to slow its pace of policy loosening.
However, the pound also faced headwinds amid growing concern that the government will raise taxes again in the autumn, potentially damaging growth.
Meanwhile, the euro was propelled higher at the start of August, thanks to its strong negative correlation with the US dollar and hotter-than-forecast Eurozone inflation.
However, weak economic data from the Eurozone and Germany began to test the single currency as the month progressed.
New attempts by the Trump administration to broker peace in the Russia-Ukraine war then infused EUR with volatility through the second half of the month, with EUR ultimately gaining support amid cautious optimism.
Political jitters in France added to the turbulence in late August as French Prime Minister François Bayrou called a vote of confidence, which he is broadly expected to lose, putting pressure on EUR.
GBP/EUR forecast
Looking ahead, the European Central Bank (ECB) and BoE will both deliver their latest interest rate decisions over the coming month.
Both the ECB and the BoE are expected to leave interest rates unchanged in September, which could potentially boost their respective currencies. Although amid recent stronger-than-expected UK data and signs of stubborn inflation, a more hawkish note from BoE policymakers may provide a greater boost for the pound.
Meanwhile, if the French Prime Minister loses his upcoming vote of confidence, the resulting political uncertainty will pose a clear risk to the euro through September.
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