British Pound-to-Euro Soars amid Hawkish BoE Rate Cut

Modified: Thursday, 7 August 2025 13:45 BST - Written by David Woodsmith

STORY LINK British Pound-to-Euro Soars amid Hawkish BoE Rate Cut

The Pound Euro (GBP/EUR) exchange rate rallied on Thursday as the Bank of England (BoE) policy decision prompted investors to scale back bets on further interest rate cuts.

At the time of writing, GBP/EUR was trading at €1.1520, up more than 0.5% since the start of the session.

The Pound (GBP) gained ground on Thursday after a sluggish start, as markets responded positively to the Bank of England’s latest policy decision.

Although the BoE delivered a widely anticipated 25-basis-point interest rate cut, the move was far from dovish. In a narrow 5-4 split, nearly half of the Monetary Policy Committee (MPC) voted to keep rates on hold, signalling reluctance to loosen policy too quickly.

Adding to the hawkish tone, the BoE raised its inflation outlook. The central bank now sees inflation peaking at 4% in September, up from its previous 3.7% forecast.

Governor Andrew Bailey reinforced this stance in a press briefing, warning that the bank must avoid reducing rates ‘too quickly or by too much’. The comments bolstered the Pound, as markets reassessed expectations for further easing.

The Euro (EUR) slipped on Thursday as a string of lacklustre German economic data releases raised fresh concerns about the Eurozone’s largest economy.


Germany’s industrial production dropped by 1.9% in June, significantly worse than the expected 0.5% decline and marking the third straight monthly contraction. The figures followed Wednesday’s report showing a surprise 1% fall in factory orders, further darkening the outlook.

The Euro came under pressure as investors digested the data, with persistent signs of weakness in Germany fuelling fears of a broader slowdown across the bloc.

GBP/EUR Outlook: BoE Tailwinds to Keep the Pound Underpinned?

The Pound Euro exchange rate may find continued support as markets digest the Bank of England’s hawkish rate cut, which could keep Sterling elevated into the weekend.

With economic calendars light on both sides, the BoE’s cautious messaging may remain a key driver for the Pound. Lingering momentum from the surprisingly tight vote and upward inflation revision could help Sterling hold its ground against the Euro.

In the absence of significant UK or Eurozone data releases, broader market sentiment may take the lead. A shift towards risk appetite could favour the increasingly risk-sensitive Pound over the traditionally safer Euro.

Additionally, movement in the US Dollar (USD) may influence the pairing due to the Euro’s inverse correlation with the ‘Greenback’. A subdued Dollar could lend support to the single currency, potentially limiting GBP gains.


Still, without fresh economic cues, volatility in the GBP/EUR exchange rate could be limited as the week draws to a close.

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TAGS: Pound Euro Forecasts