Pound-to-Euro Retreats Slips as Fed Dovish Shift Lifts EUR

Modified: Thursday, 11 December 2025 19:01 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Retreats Slips as Fed Dovish Shift Lifts EUR

The Pound-to-Euro exchange rate (GBP/EUR) slipped to an eight-day low on Thursday as the Federal Reserve’s policy shift reverberated across global currency markets.

At the time of writing, GBP/EUR was trading around €1.1418, having recovered slightly from its earlier trough of €1.1414.

The Euro (EUR) found renewed support on Thursday as its inverse relationship with the US Dollar (USD) came back into play.

The ‘Greenback’ weakened following the Federal Reserve’s decision to cut interest rates by 25 basis points on Wednesday evening. Chair Jerome Powell struck a notably softer tone than expected, prompting traders to factor in additional easing through 2026.

As USD slipped, the Euro moved higher — a familiar dynamic given the long-standing negative correlation between the currencies.

The Pound (GBP) softened on Thursday as markets reassessed the implications of the Fed’s dovish pivot for future Bank of England (BoE) policy.

With the US central bank hinting at a potentially faster pace of easing, speculation grew that the BoE may feel compelled to follow with cuts of its own in 2026.

Sterling sentiment was further weighed down by recent comments from BoE officials, including suggestions that the UK’s autumn budget could trim inflation by up to 0.5 percentage points.

Softer inflation expectations and shifting policy bets led markets to raise their forecasts for BoE rate cuts, putting additional downward pressure on the Pound.

GBP/EUR Exchange Rate Forecast: Weak GDP Reading to Pressure the Pound?

Looking ahead, the Pound will take direction from Friday’s UK GDP data. Economists expect the economy to have returned to growth in October following September’s 0.1% contraction — though only by a marginal 0.1%.

Such a modest rebound is unlikely to meaningfully shift sentiment toward Sterling. In fact, there is a clear risk that the reading could disappoint. October uncertainty — particularly in the build-up to the autumn budget — may have weighed on both investment and consumer confidence.

A weaker-than-expected GDP print could see the Pound decline further.

For the Euro, with no major Eurozone releases due, movement is likely to be influenced by broader USD dynamics and any emerging geopolitical headlines, factors that may continue to steer GBP/EUR direction into the end of the week.

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TAGS: Pound Euro Forecasts