Pound to Euro Hits 10-Month High

– Written by


David Woodsmith

STORY LINK Pound to Euro Hits 10-Month High

The Pound Euro (GBP/EUR) exchange rate climbed to a ten-month high on Wednesday, as the common currency failed to capitalise on encouraging German data.

At the time of writing, GBP/EUR was trading at €1.1599, having retreated from its earlier peak.

The Euro (EUR) softened on Wednesday, even as fresh German data offered some encouragement.

Germany’s latest IFO business climate index showed morale in the Eurozone’s largest economy improving to a three-month high in June, rising from an upwardly revised 85 in May to 85.6. However, with the figure matching market forecasts, the release failed to provide the Euro with much support.

Instead, EUR was pulled lower by its strong inverse relationship with the US Dollar (USD). The US Dollar extended its recent rally as Federal Reserve interest rate hike expectations and concerns over a possible AI bubble kept demand for the ‘Greenback’ elevated.

The Pound (GBP) initially advanced on Wednesday, as Sterling found support from fading political uncertainty in the UK.

With Prime Minister Keir Starmer having resigned on Monday, investors now seem to expect Andy Burnham to take over without a lengthy leadership contest.

The prospect of a quick and orderly transfer of power appeared to reassure GBP investors, helping the Pound rise as fears of prolonged political instability receded.

However, GBP/EUR suffered some profit-taking after touching a ten-month high, with Sterling trimming most of its daily gains against the Euro.

Near-Term GBP/EUR Forecast: German Consumer Data to Support the Euro?

Looking ahead, Thursday’s session opens with Germany’s latest GfK consumer confidence index for July.

An improvement in household sentiment in the Eurozone’s largest economy could offer the Euro some early support, particularly if the data points to stronger consumer resilience.

For the Pound, the UK’s latest Confederation of British Industry (CBI) distributive trades survey is also due out. However, the release may have only a muted impact on Sterling if it shows a slight improvement while remaining in negative territory.

Instead, GBP investors may remain focused on UK politics as Andy Burnham prepares to enter Number 10. Speculation over his choice of Chancellor could drive movement in UK bond markets, with the Pound potentially reacting to how investors assess the implications for borrowing and fiscal policy.

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TAGS: Pound Euro Forecasts