Pound-to-Euro Slips as Strong German ZEW Boosts Euro Rates

Modified: Wednesday, 22 July 2026 06:31 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Slips as Strong German ZEW Boosts Euro Rates

The Pound Euro (GBP/EUR) exchange rate edged lower on Tuesday after stronger-than-expected German economic data provided support for the single currency.

At the time of writing, GBP/EUR was trading at around €1.1752, down approximately 0.1% on the day.

The Euro (EUR) firmed on Tuesday after Germany’s latest ZEW economic sentiment survey came in well above expectations.

Confidence in the Eurozone’s largest economy climbed more sharply than forecast in July, with the index jumping from 10.5 to a five-month high of 26.3, comfortably beating expectations for a reading of 18.

The stronger-than-expected result encouraged optimism that improving prospects for the German economy could also signal a brighter outlook for the wider Eurozone, lending support to the single currency.

The Pound (GBP) traded in a narrow range on Tuesday, with the UK’s latest labour market figures offering support but doing little to drive Sterling higher.

The latest employment report showed the unemployment rate unexpectedly remained at 4.9% in the three months to May, rather than increasing to 5% as markets had forecast. It also revealed employment rose by 147,000, exceeding expectations for an 85,000 increase.

Although the stronger labour market data helped to support the Pound, it was not enough to generate any meaningful gains.

Political news may also have kept Sterling in check. New Prime Minister Andy Burnham surprised markets by appointing John Healey as Chancellor, overlooking the widely expected Shabana Mahmood.

Burnham also unveiled plans to reduce VAT on household electricity bills, while reports indicated he intends to cut business rates for the hospitality sector by 20%, prompting some investors to question how these measures would be financed.

Near-Term GBP/EUR Forecast: UK Inflation in Focus for Pound

Attention now turns to Wednesday’s publication of the UK’s latest consumer price index, with the Pound likely to come under pressure if inflationary pressures softened during June.

Economists expect headline inflation to ease from 2.8% in May to 2.7% in June, while core inflation is forecast to edge lower from 2.6% to 2.5%.

A reading in line with forecasts could weaken expectations that the Bank of England (BoE) will increase interest rates in the near future. However, any surprise in the data could trigger sharper movement in Sterling.

For the Euro, trading may remain subdued as EUR investors await the European Central Bank’s (ECB) latest interest rate decision on Thursday.

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TAGS: Pound Euro Forecasts