Pound-Euro Slips as Eurozone Factory Prices Jump

Modified: Thursday, 3 September 2026 22:46 BST - Written by David Woodsmith

STORY LINK Pound-Euro Slips as Eurozone Factory Prices Jump

The Pound to Euro (GBP/EUR) exchange rate drifted lower on Thursday, with Sterling facing headwinds from renewed evidence of inflationary pressure across the Eurozone and a downward revision to UK services growth.

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1628, representing a modest decline from Thursday’s opening levels.

The Euro (EUR) found some support on Thursday following the release of the Eurozone’s latest producer price index (PPI).

Eurostat data revealed that producer prices jumped 1.6% in July, reversing June’s 0.3% decline and comfortably exceeding forecasts for a 1.3% increase.

The sizeable monthly increase in factory gate prices, alongside Tuesday’s stronger-than-anticipated consumer inflation figures, suggested that price pressures across the bloc may be proving more persistent than previously expected.

This helped to strengthen expectations that the European Central Bank (ECB) could maintain its tightening bias beyond the interest rate increase markets are already widely anticipating next week.

Sterling remained subdued on Thursday as the final UK services PMI revealed that activity expanded at a slightly slower pace than initially estimated.

The S&P Global UK Services PMI was revised down from 52.8 to 52.5 in August. Despite the downgrade, the index remained above July’s reading of 52.1 and continued to signal the strongest expansion in the services sector since April.

As a result, the revision had only a limited effect on Pound exchange rates.

Instead, Sterling remained sensitive to wider market conditions, with UK government borrowing costs still elevated after the recent selloff in global bond markets.

Near-Term GBP/EUR Forecast: Bailey Speech and German Factory Orders in Focus

Attention now turns to a speech from Bank of England (BoE) Governor Andrew Bailey, which could provide fresh direction for the Pound to Euro exchange rate on Friday.

While expectations for a BoE interest rate hike later this year have strengthened, Sterling could face renewed selling pressure if Bailey adopts a cautious tone and offers little indication that policymakers are preparing to tighten monetary policy further.

For the Euro, meanwhile, Germany’s latest factory orders figures could prove a headwind.

July’s data is expected to show a significant slowdown in new orders, potentially weighing on the single currency if the figures fall short of expectations.

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TAGS: Pound Euro Forecasts