GBP/EUR exchange rate week review: pound hits four-year high versus euro
16/12/2024 to 20/12/2024: The pound euro (GBP/EUR) exchange rate touched a multi-year high following ahead of the Bank of England's final interest rate decision of 2024.
Monday
The pound euro (GBP/EUR) exchange rate jumped to around €1.208 after the UK’s preliminary services PMI for December showed an unexpected rise in services output and signs of persistent inflation in the sector. This dampened Bank of England (BoE) interest rate cut speculation.
Tuesday
A larger-than-expected increase in UK wage growth poured more cold water on hopes of a BoE rate cut later in the week, lifting the pound to within touching distance of €1.21.
The euro headed in the opposite direction following the release of underwhelming German business sentiment data showing morale declined more than expected in December in the bloc’s largest economy.
Wednesday
The pound ticked above the €1.21 level after UK inflation rose to 2.6% in November, an eight-month high. With the headline rate rising further above the BoE’s 2% target for a second consecutive month, speculation that the BoE would hold borrowing costs steady the following day intensified.
The euro was undermined by Eurozone consumer prices data showing the annual inflation rate for November was revised slightly down, adding weight to European Central Bank (ECB) rate cut expectations.
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Thursday
The pound euro rate touched a four-year high in the €1.21 mid-range ahead of the BoE’s interest rate decision. However, the pair tumbled into the €1.20 mid-range after the central bank left borrowing costs unchanged in its final policy decision of the year. In an unexpected 6-3 split, a trio of rate-setters voted to cut rates to stimulate the economy after the central bank predicted zero growth in the final quarter of 2025 - a dovish tilt that sullied pound sentiment.
The euro was muted amid ongoing dollar strength that applied downward pressure to the single currency.
A better-than-expected improvement in Germany’s consumer confidence index couldn’t lift the euro, with consumers in the bloc’s largest economy remaining deeply downbeat.
Friday
Lingering headwinds from the BoE’s interest rate decision were compounded by weaker-than-expected UK retail sales in November, despite the Black Friday sales.
Sales volumes increased 0.2% month on month, falling short of the 0.5% forecast but up from a 0.7% slump in sales in October, providing a glimmer of hope.
The pound euro exchange rate ended the week at around €1.205.
Looking ahead
The Christmas period means third quarter GDP data from the UK economy on Monday is the only release of note next week. Preliminary data showed growth of just 0.1%, amid a contraction in September. If a meagre expansion is confirmed for the last three months of the year, the pound could falter.