GBP/EUR exchange rate week review: pound suffers early 2025 hit against euro
30/12/2024 to 03/01/2025: Following a quiet start to the week, the pound euro (GBP/EUR) exchange rate was undermined by downbeat data from the UK manufacturing sector.
Monday, Tuesday, Wednesday
The pound euro (GBP/EUR) exchange rate traded without a clear direction through the €1.20 range amid an absence of macroeconomic data and the New Year’s Day bank holiday on Wednesday.
Thursday
The pound suffered losses against the euro during the first trading day of 2025 following the release of a lacklustre UK manufacturing PMI and news of another rise in wholesale gas prices. The UK currency fell half a per cent to €1.2013 before paring its losses and recovering to €1.2057.
Rapidly falling output, employment and new orders caused the manufacturing sector to hit an 11-month low in December. The PMI printed at 47 in December, down from 48 in November – the third consecutive month it has remained below the 50 mark that separates contraction from growth.
The cost of UK wholesale gas prices hit a two-year high, signalling rising energy costs for businesses and households. Concerns about the economic impact of a further rise in natural gas prices modestly increased the probability of a Bank of England (BoE) rate cut in February.
Friday
The pound euro exchange rate remained in the €1.20 mid-range but edged lower after data from the British Retail Consortium showed a 2.2% decline in footfall on UK high streets in December – a traditionally busy period for retailers. For the three months to December – referred to as the golden quarter – footfall decreased by 2.5% year on year.
The euro was subdued after data showed German unemployment rose less than expected in December. According to official figures, the number of unemployed increased by 10,000 in seasonally adjusted terms to 2.87 million, less than the rise of 15,000 forecast by analysts.
Looking ahead
German and EU inflation data hits the headlines on Monday and Tuesday respectively. European Central Bank (ECB) rate-setter, who are expected to cut rates further in 2025 as weak growth and cooling inflation persist, will pay close attention to both prints. If inflation in the bloc continues to edge lower towards the ECB’s 2% target the euro will be bolstered.
A data-light week in the UK brings the services PMI on Monday and BRC like-for-like retail sales on Tuesday into sharp focus for investors in the pound.