Pound to Euro Soft Amid UK Political Worries

Modified: Wednesday, 12 November 2025 22:15 BST - Written by David Woodsmith

STORY LINK Pound to Euro Soft Amid UK Political Worries

The Pound-to-Euro exchange (GBP/EUR) rate fell on Wednesday as renewed political uncertainty weighed on Sterling sentiment, following reports that UK Prime Minister Sir Keir Starmer could face a leadership challenge.

At the time of writing, GBP/EUR was trading around €1.13286, edging back toward the two-and-a-half-year low reached in early November.

The Pound (GBP) weakened in early trade as speculation swirled that Starmer’s leadership could come under pressure in the coming months.

Sources close to the Prime Minister suggested that senior Labour figures may be positioning to challenge him after the autumn budget or following next May’s local elections.

The rumours unsettled investors, reigniting memories of the political turmoil that gripped the UK during the later stages of Conservative rule.

Markets grew cautious on fears that Starmer’s removal could jeopardise the government’s fiscal credibility at a time when confidence in the UK’s economic management remains fragile.

This renewed uncertainty weighed on the Pound, adding to an already bearish outlook as investors priced in further Bank of England (BoE) rate cuts and tighter fiscal conditions in the months ahead.

The Euro (EUR), meanwhile, struggled to capitalise on Sterling’s weakness, with upside momentum limited by an improvement in overall market sentiment.

As risk appetite improved, investors turned toward higher-yielding assets, reducing demand for the safer single currency.

Adding to the pressure, a modest rebound in the US Dollar (USD) also capped EUR gains, given the Euro’s inverse correlation with the Greenback.

However, the common currency drew limited support from stronger-than-expected German wholesale prices data, which showed a surprise uptick in October and hinted at stabilising factory gate inflation.

GBP/EUR Forecast: UK GDP Data to Set Sterling’s Next Move

Looking ahead, attention turns to Thursday’s release of the UK’s preliminary third-quarter GDP figures, which are expected to show a marked slowdown in growth.

Analysts forecast that the economy expanded by just 0.2% in Q3, down from 0.3% in the previous quarter, while business investment is expected to have declined for a second straight period.

If confirmed, the data could deepen concerns about the UK’s weak growth trajectory and fuel speculation that the BoE will move to cut rates again in December — likely keeping the Pound under pressure.

Across the Channel, the European Central Bank’s (ECB) latest economic bulletin and industrial production figures will guide Euro sentiment.

If the bulletin strikes a confident tone on inflation and growth, or if September’s output data shows a rebound, the Euro may find some support heading into the weekend.

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TAGS: Pound Euro Forecasts