Pound to Euro Price News Today: GBP Tumbles on Soaring UK Borrowing Costs

Modified: Tuesday, 2 September 2025 17:30 BST - Written by David Woodsmith

STORY LINK Pound to Euro Price News Today: GBP Tumbles on Soaring UK Borrowing Costs

The Pound to Euro exchange rate (GBP/EUR) tumbled on Tuesday as surging UK bond yields reignited concerns over fiscal stability.

At the time of writing, GBP/EUR was trading around €1.1511, down roughly 0.4% from the start of Tuesday’s session.

The Pound (GBP) came under pressure on Tuesday after 30-year gilt yields climbed to 5.69% – their highest level since 1998.

The sharp rise in borrowing costs has dramatically reduced Chancellor Rachel Reeves’s fiscal room ahead of the autumn budget, with analysts estimating a potential £20–25bn shortfall.

Markets are increasingly worried about the sustainability of UK finances, as rising long-term interest payments risk forcing difficult trade-offs in the form of tax hikes or spending cuts – both of which could weigh on growth.

While Sterling’s losses were softened somewhat by continued hawkish sentiment around future Bank of England (BoE) policy, the scale of the bond market move kept GBP firmly on the defensive.

The Euro (EUR) found support on Tuesday from stronger-than-expected inflation figures.

Flash CPI data for August showed price growth accelerating to 2.1%, beating forecasts for a steady 2% reading and marking the highest level since April.

The upside surprise reinforced expectations that the European Central Bank (ECB) is nearing the end of its rate-cutting cycle.

That said, gains for the Euro were capped as European bond yields also moved higher, reflecting broader investor unease over fiscal dynamics across the region.

GBP/EUR Forecasts: Eurozone PPI Data in Focus

Looking ahead, the Pound to Euro (GBP/EUR) exchange rate is likely to remain under pressure if UK bond yields stay elevated through mid-week trade.

A speech from Catherine Mann, one of the BoE’s more hawkish policymakers, could offer Sterling some support if she pushes back against aggressive rate cut bets.

For the Euro, attention will turn to the Eurozone’s latest producer price index (PPI).

If July’s figures confirm a slowdown in factory input prices, it may dampen inflation expectations and limit support for the single currency.

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TAGS: Pound Euro Forecasts