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After 360 days of trading within a narrow band, the pound finally broke free of the euro’s gravitational pull this week and powered through the €1.16 resistance level.
However, even though GBP/EUR is at its best for year, this still feels like an uncertain move upwards. And what, in any case, is it really based on? To discuss locking this rate in, in the event that it disappears, call your account manager.
Against a US dollar boosted by surprisingly strong GDP data released yesterday (quarterly growth of 2.1% in the USA) , the pound continues to struggle. On Wednesday GBP/USD hit its lowest since last November when it was beset by worries over Rachel Reeves’ autumn Budget. Eight months is a long time in politics and right now the markets are questioning who Andy Burnham will choose as his own chancellor.
Nevertheless this has been a purple patch for sterling overall, with gains this week against all-comers except for the US dollar. The biggest gains were on the Scandinavian and antipodean currencies, against all of which it has strengthened by more than 1.5% this week.
The UK has been a little light on economic data, but we’ve had good news on car production, and the positivity – better retail sales data and falling unemployment and inflation – may be hanging over from last week too.
The real currency story, however, is US dollar strength. It is fighting back against the losses of 2025 and while a long way below the levels of pre-Trump, at its best for a year against both EUR and GBP.
Also returning to previous levels, the oil price. Brent crude is now cheaper than before the Middle East crisis. So does this mean that inflation will start to come down and bring interest rates with it? Yesterday we heard that the Fed’s preferred gauge of underlying inflation Core PCE price index, rose by 0.3% from the previous month in May 2026, but personal income rose by twice the expected rate. So the jury is still out on that one.
GBP: Stronger pound but will it last?
After a quiet week for data the pound strengthened yesterday. The news that the markets are waiting for is the make-up of Andy Burnham’s cabinet and in particular his pick for chancellor. Next week we will get house price data. The property market underpins many elements of the economy, not least whether you can sell your UK property to buy overseas, so signs of recovery will be a boost to many would-be retirees and holiday home buyers overseas.GBP/USD: the past year
EUR: Inflation data could lead direction
There was a clear mix of green and red on the charts for the euro this week as it lost out to the safe havens (USD, JPY, CHF) and gained on the commodity-backed currencies (NZD, AUD, NOK…). It also lost to the pound, as already mentioned, to its weakest for a year. Next week we’ll get inflation data and a clue as to whether the ECB will continue to raise interest rates or wait to see the impact of this month’s hike.GBP/EUR: the past year
USD: US economic boost continues
After a strong rise to midweek the froth came off some of the US dollar’s gains yesterday in a choppy session after the incredible GDP performance – the US economy growing by 2.1% in the first three months of the year. The biggest boost was in business investment in equipment (15.8%). We also heard that Americans are both paying themselves more than expected and spending more. Next week is all about jobs, with JOLTs job openings and Non-Farm Payrolls.USD/GBP: the past year
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