Pound-to-Euro Rate Climbs towards €1.17 on Brighter UK Productivity Outlook

Modified: Tuesday, 25 August 2026 20:31 BST - Written by James Fuller

STORY LINK Pound-to-Euro Rate Climbs towards €1.17 on Brighter UK Productivity Outlook

The Pound to Euro (GBP/EUR) exchange rate edged higher at the start of the week as fresh analysis suggested the UK economy may be benefiting from stronger productivity growth than official figures indicate.

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1680, up almost 0.2% from Monday’s opening levels.

The Pound (GBP) started the week on a firmer footing after research indicated that UK productivity could be in better shape than official data suggests.

Analysis from the Resolution Foundation thinktank argues that the prolonged weakness in UK productivity following the 2008 financial crisis may have begun to reverse in recent years.

Official labour force survey figures continue to paint a relatively subdued picture, but the thinktank's alternative measure points towards a more encouraging underlying trend.

If the analysis proves accurate, stronger productivity could provide a firmer foundation for UK economic growth and support improvements in living standards over the longer term.

The Euro (EUR) slipped on Monday as the US Dollar (USD) recovered some ground ahead of the expected unveiling of a fresh package of US sanctions against Iran.

Markets were waiting for further details of the measures, with US Treasury Secretary Scott Bessent expected to provide more information later in the day. Washington has suggested the restrictions could significantly increase economic pressure on Tehran, while Iranian officials have warned that additional sanctions could prompt retaliatory action against Gulf oil exports.

The uncertainty surrounding the announcement encouraged a degree of caution across financial markets, supporting demand for the safe-haven US Dollar and leaving the Euro on the back foot.

Near-Term GBP/EUR Forecast: Stronger German Sentiment Could Support the Euro

Looking ahead, Germany's latest IFO business climate survey is likely to provide the next significant catalyst for the Pound to Euro exchange rate.

A further improvement in business confidence during August could lend support to the single currency, particularly if the survey points to greater optimism across Germany's private sector.

Germany will also release its latest GDP figures on Tuesday. Unless the data contains a notable revision to second-quarter growth, however, its influence on the Euro may prove relatively limited.

Meanwhile, the UK economic calendar remains relatively quiet through the first half of the week, potentially leaving Sterling to trade without a strong directional catalyst on Tuesday.

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TAGS: Pound Euro Forecasts