The British Pound (GBP) maintained its strength against the Euro (EUR) on Thursday, with the EUR/GBP pair trading defensively for the fifth consecutive day after being rejected from the 0.8600 psychological level last week. At the time of reporting, EUR/GBP was trading around 0.8537, marking its lowest point since mid-August [1].
This resilience in the Pound was driven by a revision in the UK’s second-quarter Gross Domestic Product (GDP), which was raised to 0.5% quarter-on-quarter from 0.4%, and the annual growth rate was revised up to 1.4% from 1.2%. These stronger-than-expected figures highlighted the UK economy’s resilience and increased expectations that the Bank of England (BoE) may tighten monetary policy in the coming months, especially as high energy costs continue to fuel inflation. Although the BoE has kept rates unchanged this year, policymaker Catherine Mann stated, “Current stance is not sufficiently tight,” and emphasized the need to raise the bank rate to ensure a sustainable return to the 2% inflation target [1].
In contrast, the Euro has been weighed down by political and fiscal concerns in France, including rising government borrowing costs and uncertainty over the country’s budget outlook, which have raised questions about debt sustainability and limited demand for the shared currency. The European Central Bank (ECB) has raised rates twice this year, but ECB President Christine Lagarde signaled a more cautious approach going forward, citing persistent inflation but no evidence of it becoming embedded, and described the ECB’s response as “measured” [1].
Despite these headwinds, the Euro found some support from Thursday’s manufacturing data, with the Eurozone HCOB Manufacturing PMI rising to 52.9 in September from 52.7, its highest since May 2022. However, the UK’s S&P Global Manufacturing PMI eased slightly to 51.9 from 52.0. The market’s attention now turns to the Eurozone’s preliminary inflation report for September, due on Friday [1].
For the week, the British Pound was the strongest against the Australian Dollar, and gained 0.76% against the Euro, reflecting broad-based strength across major currencies [1].
CONCLUSION
The British Pound’s gains against the Euro were underpinned by stronger UK growth data and hawkish signals from the Bank of England, while the Euro remained pressured by fiscal concerns in France and a cautious ECB outlook. Market participants are now watching upcoming Eurozone inflation data for further direction. Overall, sentiment favors the Pound in the near term.