Pound to Euro Rate "Treads Water" as Sentiment Signals Clash

Modified: Thursday, 29 January 2026 19:31 BST - Written by Frank Davies

STORY LINK Pound to Euro Rate "Treads Water" as Sentiment Signals Clash

The Pound to Euro exchange rate (GBP/EUR) struggled to find direction on Thursday as markets assessed the Eurozone’s latest economic sentiment figures.

At the time of writing, GBP/EUR was trading at €1.1541, little changed from its opening levels.

The Pound (GBP) struggled to find its footing during a quiet week for UK markets, with a thin domestic data calendar and an absence of notable political or economic developments offering little guidance to traders.

As a result, Sterling drifted without conviction on Thursday, leaving GBP/EUR confined to a narrow range as investors searched in vain for a clearer directional cue.

Meanwhile, the Euro (EUR) struggled to build momentum as investors weighed a mixed set of signals from the Eurozone’s latest economic sentiment data.

While confidence in the bloc beat forecasts in January, climbing from 97.2 to a three-year high of 99.4, this optimism was tempered by a sharper-than-expected drop in consumer inflation expectations, which fell from 26.7 to 24.1.

Although the European Central Bank (ECB) is unlikely to adjust interest rates any time soon, the decline in inflation expectations dulled the positive impact of the stronger sentiment figures.

The Euro had already come under pressure on Wednesday after comments from ECB policymaker Martin Kocher, who suggested further rate cuts could be considered if the Euro continues to appreciate against the US Dollar (USD), following EUR/USD’s rise to a four-and-a-half-year high.

GBP/EUR Forecast: Eurozone GDP Takes Centre Stage

Looking ahead, attention turns to the Eurozone’s preliminary fourth-quarter GDP figures on Friday, which could provide the next meaningful catalyst for the Pound Euro pairing.

Markets are forecasting a modest slowdown in growth, with GDP expected to ease from 0.3% in the third quarter to 0.2% in Q4. Confirmation of weaker growth may weigh on the Euro, while any significant deviation from expectations could trigger a sharper reaction.

The single currency may also respond to Germany’s preliminary inflation data for January. An uptick in price pressures could bolster expectations that the European Central Bank remains cautious on rate cuts, offering the Euro some support.

By contrast, the UK calendar remains notably quiet through the end of the week, leaving GBP/EUR largely at the mercy of Euro-driven developments.

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TAGS: Pound Euro Forecasts