Pound Sterling Hits Best Euro Rate of Three Months Amid Greenland Jitters

Modified: Wednesday, 7 January 2026 10:46 BST - Written by David Woodsmith

STORY LINK Pound Sterling Hits Best Euro Rate of Three Months Amid Greenland Jitters

The Pound to Euro exchange rate (GBP/EUR) held firm on Tuesday, extending gains after touching a three-month best at the start of the week as the Euro remained under pressure from geopolitical and economic concerns.

At the time of writing, GBP/EUR was hovering near €1.1555, little changed on the session but comfortably elevated near recent highs.

The Euro (EUR) struggled to attract support on Tuesday as sentiment was dented by renewed unease over US geopolitical intentions, particularly surrounding Greenland.

In the wake of recent US military action in Venezuela, markets have grown more sensitive to comments from President Donald Trump, including his repeated assertion that Greenland is critical to US national security. Delivered shortly after the arrest of Venezuelan President Nicolás Maduro, the remarks have raised concerns about broader US territorial ambitions, prompting some investors to apply a fresh risk premium to the single currency.

EUR sentiment was further undermined by the latest Eurozone PMI releases. December’s final readings were revised lower, reinforcing concerns that the bloc’s economic momentum remains fragile heading into the new year.

The Pound (GBP) softened modestly on Tuesday after the release of the UK’s final services PMI for December.

Although the index was revised marginally higher from 51.3 to 51.4, it still fell well short of the initial flash estimate of 52.1. The downgrade dampened hopes that the UK’s dominant services sector finished the year with stronger momentum.

Survey respondents continued to flag familiar headwinds, including subdued demand, rising input costs and weaker overseas orders. These signals highlighted the fragile state of the sector and revived concerns about the UK’s growth outlook into 2026.

The softer tone of the data may also strengthen expectations that the Bank of England (BoE) will lean towards a more accommodative policy stance later in the year, limiting Sterling’s upside despite its recent strength against the Euro.

GBP/EUR Forecasts: Cooling Inflation to Weigh on the Euro?

Looking ahead to Wednesday, the next key catalyst for the Pound Euro exchange rate will be the Eurozone’s latest inflation figures.

Economists expect December’s preliminary CPI release to show headline inflation easing further, from 2.1% to 2.0%. Confirmation of cooling price pressures could weigh on the Euro, particularly if it revives doubts over whether the European Central Bank has definitively reached the end of its easing cycle.

With little in the way of fresh UK economic data scheduled, Sterling may lack a strong domestic driver and could struggle to extend gains further, leaving GBP/EUR sensitive to Eurozone developments and broader shifts in market sentiment.

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TAGS: Pound Euro Forecasts