Pound-to-Euro: Recovers from Bond Market Panic

July 3, 2025 - Written by James Fuller

STORY LINK Pound-to-Euro: Recovers from Bond Market Panic

The Pound Euro exchange rate (GBP/EUR) regained ground on Thursday as calm returned to markets and upbeat PMIs supported Sterling.

At the time of writing, GBP/EUR traded at €1.1587, up around 0.4% after touching an 11-week low on Wednesday.

The Pound (GBP) steadied on Thursday, regaining some ground after Wednesday’s sharp decline, as political jitters in Westminster began to subside. Markets were rattled midweek by rumours that Chancellor Rachel Reeves might be ousted, sending UK government bonds tumbling and dragging Sterling lower.

However, Prime Minister Keir Starmer moved swiftly to silence the speculation, publicly backing Reeves in a Wednesday evening interview and insisting she would remain in her role ‘for a very long time to come’. The intervention helped soothe investor nerves, prompting a modest rebound in both bonds and the Pound.

Adding to the improved mood, the UK’s final services PMI for June was revised up to 52.8, comfortably above the flash reading of 51.3 and marking the strongest expansion in the sector in ten months.

Even so, while these developments offered Sterling some respite, the currency struggled to mount a meaningful rally, suggesting lingering caution among traders.

The Euro (EUR) traded without much conviction on Thursday, as the latest business activity surveys from the Eurozone did little to energise the single currency.


June’s final services PMI for the bloc was nudged higher to 50.5, up from May’s 49.7 and slightly above the initial flash estimate of 50. While this points to the sector narrowly returning to growth, the reading still signalled only marginal expansion, leaving investors underwhelmed.

As a result, the Euro largely drifted within tight ranges against its major counterparts, with traders seemingly indifferent to the modest improvement in the data.

Looking ahead, Friday brings a fresh batch of economic data and central bank commentary that could sway EUR exchange rates.

The day starts with Germany’s factory orders for May, where a slight 0.1% dip is anticipated. Such a result may weigh on the Euro early on, signalling continued weakness in the industrial sector of the Eurozone’s largest economy.

Later, markets will tune in to remarks from European Central Bank (ECB) President Christine Lagarde. With Eurozone inflation recently touching the ECB’s 2% target, any hints from Lagarde that policymakers are comfortable holding rates steady could lend the Euro some support.

However, the picture might turn more mixed as the session progresses, with Eurozone producer price figures expected to show a further decline in May. Softer producer prices would underline lingering disinflationary forces in the bloc, potentially dragging on the common currency.

On the UK side, the calendar is notably light, leaving the Pound to take its cues from domestic headlines and broader market sentiment. Should investors remain in a risk-on mood, the more risk-sensitive Sterling might find room to advance against the Euro.

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TAGS: Pound Euro Forecasts