Pound-to-Euro Rises as Markets Rethink BoE Bets

July 22, 2025 - Written by Frank Davies

STORY LINK Pound-to-Euro Rises as Markets Rethink BoE Bets

The Pound to Euro exchange rate (GBP/EUR) rose on Monday as markets continued to rethink the Bank of England’s (BoE) monetary policy path.

At the time of writing, GBP/EUR traded at €1.1552, up around 0.2% on the day.

The Pound (GBP) started the week on firmer footing as markets continued to reassess the Bank of England’s monetary policy outlook, following a batch of surprisingly strong UK economic data.

Sterling’s resilience stems from June’s inflation reading, which came in hotter than expected at 3.6% – up from 3.4% the previous month – alongside a surge in payrolled employment through May. These figures have led traders to scale back expectations of a rapid easing cycle from the BoE.

While a rate cut in August is still widely priced in, bets on a follow-up move in September have cooled. The trajectory for interest rates now appears more gradual, with investors anticipating a slower pace of cuts than previously forecast.

Even in the absence of fresh domestic data, the Pound remained buoyed on Monday by this recalibrated rate outlook, suggesting the currency could stay supported if the BoE continues to strike a cautious tone.

The Euro (EUR) inched slightly higher at the start of the week, eking out modest gains against most major peers. However, lingering concerns over transatlantic trade relations prevented the common currency from gaining much altitude and put it on the back foot against the Pound.


A softening US Dollar (USD) offered some underlying support for the Euro, thanks to their inverse trading relationship. But this tailwind was offset by growing unease over the risk of escalating EU-US trade tensions.

Comments from US Commerce Secretary Howard Lutnick over the weekend worried EUR investors. Lutnick reaffirmed that 1 August remains a firm deadline for agreeing a trade deal. Failure to do so would see the US slap 30% tariffs on European exports to the US.

Reports suggest the EU is already mapping out its own retaliatory measures, fuelling worries of a transatlantic trade war. These jitters kept the Euro’s upside in check on Monday, with traders reluctant to commit ahead of what could be a volatile few weeks for EU-US trade dynamics.

With Tuesday’s economic calendar relatively sparse, GBP/EUR movement may hinge on a handful of second-tier economic events.

In the UK, attention will turn to the latest public sector borrowing figures. Should the data reveal that government borrowing remains elevated, it could prompt renewed speculation over the prospect of tax hikes in the autumn – a development that might dampen sentiment around the Pound.

Across the Channel, EUR investors will be tuned in to a speech by European Central Bank (ECB) President Christine Lagarde. While any hints on monetary policy could move the Euro, expectations for market-shifting remarks are low, with the ECB’s next rate decision just around the corner.

With few data catalysts in play, both currencies may remain sensitive to broader risk sentiment and geopolitical developments as traders await more decisive signals later in the week.

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TAGS: Pound Euro Forecasts