Pound to Euro Rebounds from Political Selloff

Modified: Monday, 18 May 2026 19:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Rebounds from Political Selloff

The Pound Euro (GBP/EUR) exchange rate strengthened on Monday, as Sterling benefitted from fading fears over an imminent Labour leadership contest.

At the time of writing, GBP/EUR was trading at €1.1493, up roughly 0.3% on the day.

The Pound (GBP) firmed on Monday, clawing back some of last week’s losses as fears over UK political turbulence started to ease.

With Prime Minister Keir Starmer appearing to have sidestepped an immediate leadership challenge, markets took some comfort from the calmer tone in Westminster. Potential rival Andy Burnham also sought to reassure investors by signalling his support for the government’s existing fiscal rules.

This helped UK bond yields pull back from their recent near 18-year highs, easing some of the pressure that had weighed heavily on Sterling last week.

GBP also found support after the IMF upgraded its 2026 UK growth forecast from 0.8% to 1%, pointing to the economy’s ‘strong pre-war momentum’.

Against this more settled backdrop, GBP was able to recover ground.

The Euro (EUR) strengthened on Monday, benefitting from its negative correlation with the weaker US Dollar (USD).

As the ‘Greenback’ lost ground, the single currency was able to attract some support, helping EUR firm against several peers.

However, with notable Eurozone economic releases absent from the calendar, the Euro lacked a clear domestic catalyst.

This left EUR vulnerable against stronger rivals, such as the recovering Pound.

Near-Term GBP/EUR Forecast: UK Labour Data to Lift the Pound?

Looking ahead, the Pound may take direction from the UK’s latest labour market data on Tuesday morning.

Markets expect unemployment to have held at 4.9% in the three months to March, while wage growth is also forecast to remain unchanged. At the same time, the employment change figure is expected to show a 107,000 increase.

If the data prints in line with forecasts, signs of resilience in the UK jobs market could reinforce expectations that the Bank of England (BoE) may need to raise interest rates.

This could offer Sterling some support, particularly if wage pressures remain sticky.

A speech from BoE Deputy Governor Sarah Breeden later in the session may also drive GBP movement. Any hawkish comments from Breeden could help the Pound extend its gains.

Meanwhile, with Eurozone data in short supply, the Euro may struggle to find a clear direction.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts