Pound Euro Exchange Rate Dented despite Surge in UK CPI

May 21, 2025 - Written by Tim Boyer

STORY LINK Pound Euro Exchange Rate Dented despite Surge in UK CPI

The British Pound-to-Euro rate (GBP/EUR) was on the defensive on Wednesday following the release of the UK’s latest inflation data.

At the time of writing, the GBPEUR exchange rate was trading at around €1.1825, down roughly 0.3% from Wednesday’s opening levels.

The Pound (GBP) struggled to hold its ground on Wednesday, as early gains following the UK’s latest inflation report were quickly unwound.

April’s consumer price index (CPI) delivered an upside surprise, with headline inflation rising to 3.5% and core CPI climbing to 3.8%, both higher than expected.

The data initially sparked a Sterling rally, as traders speculated the figures could force the Bank of England (BoE) to delay any upcoming interest rate cuts.

However, the rally proved short-lived. Market enthusiasm cooled as a closer look at the data revealed that the jump in inflation was largely fuelled by one-off factors, such as increased airfares and road tax changes, rather than sustained underlying pressure.

As a result, expectations for two rate cuts this year remained intact, and the Pound ended the day trading on the back foot.


The Euro (EUR) advanced against most major peers on Wednesday, despite a lack of fresh economic data from the Eurozone.

Instead, the single currency drew support from broader market sentiment, as a cautious market mood prompted demand for safer assets.

Adding to the Euro’s momentum was continued weakness in the US Dollar (USD).

With the two currencies often moving in opposite directions, the Dollar’s downturn helped lift EUR exchange rates through the midweek session.

GBP/EUR Forecast: UK and Eurozone PMIs to Drive Movement

The Pound Euro (GBP/EUR) exchange rate could face notable movement on Thursday as markets react to the latest flash PMI figures from both the UK and Eurozone.

In the UK, the spotlight will be on whether activity in the manufacturing and services sectors picked up in May.


Markets are particularly focused on the services PMI, with projections pointing to a reading of 50, a level that would indicate the sector has returned to expansion and could boost confidence in the UK’s economic momentum.

Across the Channel, the Eurozone’s PMI data is also set to be released.

Economists forecast modest improvements across both the manufacturing and services sectors, which may help underpin the Euro in the latter part of the week.

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TAGS: Pound Euro Forecasts