Pound to Euro Rate Falls as BoE Dials Back Inflation Outlook

Modified: Thursday, 18 June 2026 20:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Rate Falls as BoE Dials Back Inflation Outlook

The Pound (GBP) to Euro (EUR) exchange rate moved lower on Thursday after the latest policy announcement from the Bank of England (BoE) prompted investors to reassess the outlook for UK interest rates.

At the time of writing, the Pound (GBP) to Euro (EUR) exchange rate was trading near €1.1533, down around 0.2% from the opening levels of the session.

The Pound (GBP) came under pressure after the Bank of England (BoE) concluded its latest meeting by leaving interest rates unchanged at 3.75%.

While the decision itself was widely anticipated, investors focused on the central bank’s updated economic assessment. Policymakers highlighted the recent decline in energy prices following progress towards peace in the Middle East and revised down their inflation forecasts, signalling that the need for additional monetary tightening has diminished.

Sterling's downside was partially limited by encouraging labour market data released earlier in the day. The latest figures showed unemployment unexpectedly declined while wage growth accelerated at the beginning of the second quarter, suggesting underlying conditions in the jobs market remain relatively resilient.

The Euro (EUR) struggled to build momentum against most major currencies on Thursday as renewed demand for the US Dollar weighed on the single currency.

The Euro's (EUR) inverse relationship with the 'Greenback' remained a key driver after the Federal Reserve delivered its latest policy update, helping to support the US currency.

Nevertheless, losses for the Euro were limited by developments in the Middle East. The signing of an interim agreement between the US and Iran, including provisions aimed at reopening the Strait of Hormuz and facilitating further negotiations, helped push energy prices lower.

For the Eurozone, which remains heavily dependent on imported energy, the prospect of cheaper oil and gas provided a supportive backdrop for the single currency.

Near-Term GBP/EUR Forecast: Makerfield Vote Could Influence Sterling

The Pound (GBP) to Euro (EUR) exchange rate may see increased volatility heading into the end of the week as attention turns to the outcome of the Makerfield by-election.

A successful return to Parliament for Andy Burnham could reignite debate over the future direction of the Labour Party and trigger speculation about a possible challenge to Prime Minister Keir Starmer's leadership, potentially creating short-term uncertainty for Sterling.

An unexpected result may prove even more disruptive if it raises fresh questions about Labour's electoral position and political stability more broadly.

Meanwhile, the Euro (EUR) could take direction from a series of appearances by European Central Bank (ECB) officials. Any signals that policymakers remain concerned about inflation and supportive of a restrictive policy stance may help underpin demand for the single currency.

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TAGS: Pound Euro Forecasts