Strong GDP Keeps Pound Sterling Near Annual Highs Against the Euro

Modified: Thursday, 16 July 2026 21:01 BST - Written by David Woodsmith

STORY LINK Strong GDP Keeps Pound Sterling Near Annual Highs Against the Euro

The Pound to Euro (GBP/EUR) exchange rate traded close to its highest level in more than a year on Thursday as investors assessed the UK's latest economic growth figures.

At the time of writing, GBP/EUR was changing hands at around €1.1791, almost unchanged from the opening levels of Thursday's session.

The Pound (GBP) traded in a relatively tight range on Thursday, with stronger-than-expected UK GDP data helping Sterling preserve the gains made earlier in the week.

Figures released by the Office for National Statistics (ONS) showed the UK economy expanded by 0.1% in May, marking a return to growth despite ongoing geopolitical tensions and elevated energy prices.

The better-than-expected reading reinforced market expectations that the Bank of England (BoE) is unlikely to begin loosening monetary policy in the near term, particularly while inflation risks remain heightened.

Sterling also continued to draw support from continued speculation over the composition of Andy Burnham's future cabinet. Reports suggesting Shabana Mahmood remains the leading contender to become Chancellor, ahead of Ed Miliband, were viewed positively by investors, with Mahmood perceived as more likely to maintain a disciplined fiscal approach.

The Euro (EUR) struggled to establish a clear trend on Thursday as the absence of significant Eurozone economic releases left traders with little fresh impetus.

Instead, movement in the single currency was largely dictated by external factors, with a firmer US Dollar limiting demand for the Euro because of the currencies' inverse trading relationship.

Near-Term GBP/EUR Forecast: Eurozone Inflation Figures in Focus

Looking ahead to Friday, the Pound to Euro (GBP/EUR) exchange rate could extend its recent gains if the latest Eurozone inflation figures reinforce expectations that price pressures are continuing to ease.

Final June CPI figures are expected to confirm inflation slowed from 3.2% to 2.8%, a result that would likely strengthen the case for the European Central Bank (ECB) to adopt a less hawkish policy stance.

Meanwhile, political developments in the UK are expected to remain an important driver of Sterling. Any further indications that Burnham intends to appoint Mahmood, or another fiscally cautious Labour figure, as Chancellor may continue to underpin confidence in the Pound.

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TAGS: Pound Euro Forecasts