Pound to Euro Dips on Eurozone Inflation Surprise

Modified: Tuesday, 2 December 2025 22:16 BST - Written by David Woodsmith

STORY LINK Pound to Euro Dips on Eurozone Inflation Surprise

The Pound to Euro exchange rate (GBP/EUR) dipped on Tuesday, with the Euro strengthening after Eurozone inflation data surprised to the upside.

At the time of writing, GBP/EUR was trading around €1.1358, marking its weakest level in nearly a week.

The Pound (GBP) trod water on Tuesday, held back by further signs that UK households are becoming increasingly uneasy about the economic outlook.

A new survey from YouGov and the Centre for Economic and Business Research showed a drop in consumer confidence last month, underscoring mounting jitters ahead of the autumn budget.

Concerns over job security added to the gloom. Perceptions of employment stability fell to their lowest level since May 2023, remaining firmly in negative territory.

These figures reinforced worries over the broader labour market, with UK unemployment having recently risen to a four-year high.

The Euro (EUR) found support on Tuesday after hotter-than-expected inflation figures out of the Eurozone.

Headline CPI ticked up from 2.1% to 2.2% in November, defying expectations for an unchanged reading and strengthening the view that the European Central Bank (ECB) is done cutting interest rates for now.

However, the single currency’s advance was partly capped by softer components beneath the headline. Prices fell 0.3% on the month, while core inflation held at 2.4% instead of rising to 2.5% as forecast.

Pound to Euro Outlook: UK Services PMI Could Dent Sterling

Looking to Wednesday, attention turns to the final November services PMIs from both the UK and the Eurozone.

A solid confirmation of growth in the Eurozone’s service sector could hand the Euro fresh support, while the Pound may struggle if UK activity is reaffirmed to be slowing toward stagnation. Any revisions to the flash readings could trigger sharper GBP/EUR movements.

Later in the day, European Central Bank (ECB) President Christine Lagarde is due to speak. If she hints that interest rates are now broadly neutral — supported by the latest inflation figures — the Euro may gain another layer of support. However, any repetition of her recent caution over the Eurozone’s fragile economic outlook could temper EUR enthusiasm.

Meanwhile, political and economic developments within the UK may continue to sway Sterling. Signs of unease within the Labour Party, or renewed warnings over Britain’s projected 2026 growth slowdown, could place the Pound under additional pressure.

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TAGS: Pound Euro Forecasts