GBP/EUR exchange rate October review: pound touches two-year high versus euro
The pound euro (GBP/EUR) exchange rate touched a two-year high in October amid ECB rate cut speculation and upbeat UK retail sales data before the Autumn Budget and a hotter-than-expected Eurozone inflation print caused it to spiral.
3 October
The pound euro (GBP/EUR) exchange rate plummeted by more than 1.1% into the €1.18 mid-range, a two-week low, following remarks by Bank of England (BoE) Governor Andrew Bailey. The central bank chief suggested that further signs of cooling inflation could prompt the BoE to become “a bit more activist” in its approach to cutting interest rates.
4 October
The pair recouped its losses after the BoE’s Chief Economist Huw Pill warned against unwinding monetary policy too quickly, helping it to climb into the €1.19 mid-range.
7 October
Data reported that retail sales in the Eurozone increased 0.2% in August, rebounding from July's stagnant reading, while German factory orders nosedived 5.8%, marking their worst drop in seven months. The pound slipped to a fraction above €1.19 on the news.
15 October
Following a period of relative calm, the pound rose above the €1.20 benchmark after data showed the rate of UK unemployment dropped to 4% from 4.1% in August – its lowest level since January. However, wage growth recorded another slowdown, putting a lid on the pound’s gains.
16 October
The pound plummeted more than 0.5% to around €1.193 after the UK Consumer Price Index (CPI) revealed that inflation printed below market forecasts in September. Notably, headline inflation dropped to a three-year low of 1.7% rather than a 1.9% expectation, opening the door for the BoE to unwind monetary policy further.
17 October
The pound rebounded above the €1.20 benchmark after the European Central Bank (ECB) voted for its first back-to-back interest rate cut in 13 years to give the flagging Eurozone economy a boost – a decision that undermined the euro.
18 October
The pound hit a two-year high in the €1.20 mid-range as speculation that the ECB will cut rates further intensified, denting the single currency. Meanwhile, the UK currency was supported by UK retail sales which grew in September, beating forecasts that they would dip.
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23 October
The pound slipped into the €1.19 range after ECB President Christine Lagarde stressed that a cautious, data-driven approach to further interest rate cuts is necessary.
“We are confident that the disinflationary path is underway and that we could continue to dial back the restrictive monetary policy, but we need to be cautious,
“We need to be cautious because data will come up and will indicate to us what is the state of the economy, what is the state of inflation, of underlying inflation,"
24 October
Underwhelming UK PMIs showing the indices for the manufacturing and services sectors printed lower than expected in October had little impact on the pound as they remained in contraction territory (a reading above 50).
29 October
The pound advanced into the €1.20 mid-range amid widening Eurozone and UK monetary policy projections, with interest rates expected to fall more slowly in the UK than in the bloc.
30 October
UK Chancellor Rachel Reeves delivered the new government’s first budget in 15 years. The Labour Party’s proposals were dominated by a slew of tax rises to the tune of £40bn, which caused the pound to slump to around €1.193. The UK currency’s losses were limited following an increase in UK borrowing which could stymie further BoE rate cuts by stoking inflation.
The single currency was supported by hotter-than-expected German inflation data and encouraging GDP prints from the Eurozone and Germany, with the largest economy in the bloc skirting recession.
31 October
The pound spiralled to a four-week low in the €1.18 mid-range amid post-budget jitters. Meanwhile, the latest CPI from the bloc showed that headline and core inflation printed above market expectations, dampening ECB interest rate cut bets, which lifted the euro.
Looking ahead
Having kept interest rates steady at 5% in September, the BoE is expected to action another cut on 7 November following the cooler-than-expected September inflation print – a move that’s likely to dent the pound.
The next ECB policy meeting is scheduled for 12 December, bringing the Eurozone CPI on 19 November and German GDP on 22 November into sharp focus for investors.