Pound-to-Euro Drops on ECB Hold

July 24, 2025 - Written by David Woodsmith

STORY LINK Pound-to-Euro Drops on ECB Hold

The Pound Euro (GBP/EUR) exchange rate weakened on Thursday following a softer-than-forecast UK services PMI and the European Central Bank’s (ECB) latest policy decision.

At the time of writing, GBP/EUR traded at €1.1513, having slipped around 0.2% since the start of the session.

The Euro (EUR) found some upward momentum on Thursday, bolstered by a hawkish tone from the European Central Bank.

Ahead of the rate announcement, EUR saw modest gains, helped by slightly better-than-expected PMI figures. However, its upside remained limited early on due the common currency’s inverse relationship with a rising US Dollar (USD).

Sentiment shifted following the ECB’s policy decision. As anticipated, the bank held interest rates steady in a unanimous vote. What surprised markets, however, was ECB President Christine Lagarde’s post-meeting remarks. Lagarde indicated the central bank would not be alarmed if inflation temporarily fell below its 2% target, while also leaving the door open to future rate hikes should economic conditions warrant a tighter stance.

The Pound (GBP) came under pressure on Thursday after disappointing UK PMI data painted a worrying picture of the services sector.

Instead of the forecast improvement, the services PMI slipped from 52.8 to 51.2, raising concerns about a slowdown in the UK’s most crucial economic sector. Of particular concern to GBP traders was a sharp uptick in job losses, which signalled potential fragility in the labour market and increased expectations that the Bank of England (BoE) could accelerate rate cuts.


Sterling’s losses were somewhat limited by trade optimism, as Indian Prime Minister Narendra Modi visited London to finalise a significant UK-India trade agreement. However, the broader mood around the Pound remained subdued.

Looking ahead, the Pound could be poised for a rebound on Friday, with UK retail sales data set to headline the session. Economists are anticipating a 1.2% increase in June, marking a potential recovery from May’s sharp 2.7% decline.

A solid print would likely give Sterling a lift, suggesting renewed strength in consumer spending. On the other hand, another weak showing may reignite concerns over the health of the UK economy and weigh on the Pound.

For the Euro, focus turns to Germany’s Ifo business climate index. The July reading is expected to reach its highest level since April 2024 – a result that could bolster EUR by signalling growing business confidence in the Eurozone’s largest economy.

Traders will also be keeping a close eye on developments in EU-US trade talks. Hints of progress towards a new agreement could support the Euro, while stalled negotiations may leave the common currency vulnerable.

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TAGS: Pound Euro Forecasts