The pound – euro (GBP/EUR) exchange rate is falling after gains yesterday.
The pound briefly hit a two-month high against the euro before retreating. The pound was supported by the BoE’s early December rate cut to 3.75% and a narrow 5–4 vote.
Governor Bailey signalled a slower pace of easing, though inflation cooled more than expected in November. Goldman Sachs expects further disinflation and forecasts three BoE rate cuts in 2026.
The euro has recovered modestly against sterling but remains weaker versus the dollar. Thin holiday liquidity persists, while the euro is supported by expectations that the ECB will stay on hold, with PMI data in focus on Friday.