Pound to Euro Eases as Risk-Off Mood Hits GBP

Modified: Monday, 13 July 2026 22:11 BST - Written by John Cameron

STORY LINK Pound to Euro Eases as Risk-Off Mood Hits GBP

The Pound to Euro (GBP/EUR) exchange rate came under pressure at the start of the week as renewed geopolitical tensions encouraged investors to reduce exposure to risk-sensitive currencies.

At the time of writing, GBP/EUR was trading around €1.1714, down approximately 0.2% from Monday's opening levels.

The Pound (GBP) struggled to gain traction on Monday as a more cautious market mood left Sterling on the back foot against its safer peers.

Sentiment deteriorated after fresh military clashes erupted in and around the Strait of Hormuz, raising fears that tensions in the Middle East are escalating once again.

The latest developments followed attacks on commercial vessels transiting the region and subsequent US strikes against Iranian military infrastructure, fuelling concerns that diplomatic efforts between Washington and Tehran may have broken down.

As the situation intensified, oil prices climbed back towards the $80-per-barrel mark, adding to investor anxiety and encouraging a move away from risk-sensitive assets.

Sterling also remained constrained by domestic political uncertainty, with markets awaiting the formal confirmation of Andy Burnham as the UK's next Prime Minister later this week.

The Euro (EUR) found modest support on Monday as higher energy prices prompted investors to reassess the outlook for European Central Bank (ECB) policy.

The prospect of more persistent inflation across the Eurozone, driven in part by rising fuel costs, fuelled speculation that the ECB may be forced to deliver another interest rate increase, lending the single currency additional support.

Near-Term GBP/EUR Forecast: Bailey Speech in Focus

Looking ahead to Tuesday, the main driver for the Pound to Euro (GBP/EUR) exchange rate is likely to be a scheduled appearance by Bank of England Governor Andrew Bailey.

If Bailey reiterates his recent cautious assessment of the UK economy and monetary policy, investors may become more confident that the Bank of England will leave interest rates unchanged throughout 2026 before considering rate cuts in 2027, potentially weighing further on Sterling.

Conversely, should Bailey acknowledge that renewed geopolitical tensions and rising energy prices present fresh inflation risks, a more hawkish tone could help the Pound recover some of its recent losses.

With no major Eurozone data due for release, movement in the Euro is expected to remain largely driven by shifts in market sentiment and developments in the Middle East.

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TAGS: Pound Euro Forecasts