• The pound euro exchange rate was infused with considerable volatility through November, with the pairing briefly striking a new 30-month low amid the uncertainty posed by the UK’s autumn budget.

What happened last month?

The pound faced notable selling pressure in November, with GBP/EUR dropping to its worst levels since May 2023.

Much of the pressure placed on Sterling was linked to the considerable uncertainty surrounding UK Chancellor Rachel Reeves’s highly anticipated autumn budget.

The drawn-out and chaotic approach to trailing potential measures drove significant volatility and criticism, with Speaker Sir Lindsay Hoyle branding it a ‘hokey cokey’ budget, where ‘one minute something is in, the next minute it is out.’

Adding additional pressure in advance of the budget were renewed bets on a December interest rate cut from the Bank of England (BoE), following a surprisingly dovish voting split in the bank’s November policy meeting, as well as underwhelming UK economic indicators.

Sterling then rebounded at the end of the month after Reeves published her budget, with markets broadly receptive to her tax and spending plans, which led to a fall in UK bond yields.

At the same time, trade in the euro was also uneven last month, in large part due to the single currency’s negative correlation with the US dollar.

Mixed economic data out of the Eurozone also infused volatility into EUR exchange rates through November, with strong PMI data being offset by deteriorating German economic sentiment.

On a more positive front, hopes that we might be inching closer to the end of the war in Ukraine brought relief for the euro at the end of the month.

GBP/EUR forecast

Both the BoE and European Central Bank (ECB) will deliver their final interest rate decisions of 2025 later this month.

The BoE is widely expected to cut rates by 25bps following its December meeting. This could trigger some weakness in the pound, particularly if policymakers hint that more easing may be needed in the new year.

In contrast, the ECB is widely expected to leave interest rates unchanged following its December policy meeting, potentially providing another boost for the euro.

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