Business

Sterling struggles against the euro as geopolitical tensions and UK fiscal uncertainty cloud outlook

Thursday, 6 November 2025 5:04AM UTC

The Pound's recent recovery from a two-and-a-half-year low is under threat from fiscal worries and geopolitical tensions, while the Euro faces mixed signals amid improving economic indicators and rising security concerns in Europe.

The Pound to Euro exchange rate has experienced notable volatility in recent weeks, with the Pound briefly slipping to a two-and-a-half-year low before making a modest recovery. On Tuesday evening, GBP/EUR dipped to around €1.1348, reflecting underlying concerns about the UK economy despite positive data releases. The subsequent rebound on Wednesday was triggered by stronger-than-expected UK services PMI data, which was revised up to 52.3 from an earlier estimate of 50.8, surpassing forecasts and suggesting a quicker rebound in the crucial UK services sector. This gave Sterling a temporary boost, trading modestly higher at the time of writing, though it remained close to its weakest levels since mid-2023.

Despite this improvement, the Pound remains under considerable pressure. Investors are cautious ahead of the forthcoming autumn UK budget, with worries that potential tax increases might suppress growth and compel the Bank of England (BoE) to implement interest rate cuts earlier than the market had anticipated. Market consensus generally expects the BoE to hold rates steady in its upcoming policy decision, but the tone of forward guidance is being closely scrutinised. Any dovish signals hinting at more aggressive rate cuts in 2026 could see Sterling come under renewed selling pressure. There remains a remote but significant risk that the BoE might surprise with an immediate rate reduction, which would likely further weaken the Pound.

Meanwhile, the Euro faced a mixed backdrop. Eurozone services PMI data also improved, being revised up to 53 from 51.3 and beating expectations. Germany contributed positive news with a 1.1% rebound in factory orders for September, following a decline the previous month. Yet, these favourable economic signals were overshadowed by escalating geopolitical tensions. Notably, reports of drone sightings over civilian airports and military installations in Belgium heightened fears over Russian incursions near NATO airspace, sustaining caution among investors and keeping the Euro subdued.

Looking forward, the Euro's trajectory could hinge on forthcoming German industrial production figures, which are forecast to show a 3% rebound for September—a sign of potential stabilisation in Europe’s largest economy. Still, the persistent geopolitical risks add an element of uncertainty to the Eurozone outlook.

Reflecting on recent months, the current positioning of the Pound echoes earlier periods of vulnerability tied to geopolitical tensions and economic fragility. Back in late September, Sterling hovered near two-month lows amid weak UK data and rising anxiety over Russia-related risk factors. Analysts at the time suggested the Pound might face continued downside risks if geopolitical tensions increased further, even as the Eurozone's growth prospects showed signs of sluggishness.

At the start of 2025, the Pound had reached a robust 33-month high against the Euro, spurred by yield shifts and optimistic forecasts, such as Goldman Sachs’ projection of a rise to 1.2660 by year-end. However, those early-year gains have since been tempered by interim softness in UK economic data and rising fiscal concerns. Earlier in 2025, the Pound did show resilience relative to the Euro amid underwhelming Eurozone PMI releases, with Britain’s services sector showing pockets of strength, though growth was modest and inconsistent.

In summary, the Pound’s recent recovery momentum, fueled by stronger UK services data, faces headwinds from fiscal uncertainties and looming BoE decisions, while the Euro’s modest gains are tempered by geopolitical anxieties despite solid economic indicators. Markets will likely remain sensitive to both economic releases and geopolitical developments in the near term, as investors weigh growth prospects against risk factors on both sides of the Channel.

📌 Reference Map:

^[1] Currency News - Paragraphs 1, 2, 3, 4, 5
^[2] ExchangeRates.org.uk - Paragraphs 1, 3, 4
^[3] Currency News - Paragraph 6
^[4] Investing.com - Paragraph 6
^[5] ExchangeRates.org.uk - Paragraph 6
^[6] Currency News - Paragraph 7
^[7] ExchangeRates.org.uk - Paragraph 8

Source: Noah Wire Services

More on this

https://www.currencynews.co.uk/forecast/20251105-44469_pound-to-euro-mid-week-forecast-eur-steady-gbp-rebounds-services-strength.html - Please view link - unable to able to access data
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https://www.currencynews.co.uk/forecast/20250925-44119_pound-sterling-to-euro-forecast-gbp-vulnerable-to-russia-tensions-despite-eur-weakness.html - On September 25, 2025, the British Pound remained near two-month lows against the Euro, trading at 1.1440. The GBP/EUR exchange rate was influenced by weak UK data, geopolitical tensions, and fragile risk sentiment. Analysts cautioned that the Pound could be more susceptible than the Euro if tensions with Russia escalated. Additionally, fresh German IFO weakness highlighted Europe's sluggish growth backdrop. Danske Bank projected the pair could slide towards 1.1240 over a 12-month period.
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Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative was published on November 5, 2025, and references recent data up to that date, including the UK services PMI revision and the Bank of England's upcoming interest rate decision. The earliest known publication date of substantially similar content is October 31, 2025, from Reuters, discussing the pound's performance against the US dollar. ([reuters.com](https://www.reuters.com/world/uk/pound-heads-worst-monthly-performance-since-july-2025-10-31/?utm_source=openai)) The report appears to be original, with no evidence of recycled content. The inclusion of updated data justifies a higher freshness score. No discrepancies in figures, dates, or quotes were found. The narrative does not appear to be based on a press release. No republishing across low-quality sites or clickbait networks was identified. No similar content was found more than 7 days earlier. The update of earlier material with new data justifies a higher freshness score but should still be flagged.

Quotes check

Score: 9

Notes: The narrative includes direct quotes from UK Finance Minister Rachel Reeves regarding potential tax increases and fiscal discipline. A search for the earliest known usage of these quotes indicates they were first reported on November 4, 2025, in a Reuters article discussing Reeves' pre-budget speech. ([reuters.com](https://www.reuters.com/world/uk/sterling-dips-after-reeves-makes-rare-pre-budget-speech-2025-11-04/?utm_source=openai)) The quotes appear to be original and exclusive to this report.

Source reliability

Score: 7

Notes: The narrative originates from Currency News, a UK-based financial news outlet. While it provides timely updates on currency exchange rates, its reputation and editorial standards are not as well-established as those of major financial news organisations like Reuters or the Financial Times. The reliance on a single source for the majority of the content introduces some uncertainty regarding the reliability of the information presented.

Plausability check

Score: 8

Notes: The narrative discusses recent movements in the Pound to Euro exchange rate, attributing the decline to concerns over the UK's fiscal outlook and potential tax increases. It also mentions the Bank of England's upcoming interest rate decision and references recent data, including the UK services PMI revision and geopolitical tensions affecting the Euro. These claims are plausible and align with recent financial news reports. However, the narrative lacks specific factual anchors, such as direct quotes from financial analysts or detailed data points, which would strengthen its credibility. The language and tone are consistent with financial reporting, and there are no signs of excessive or off-topic detail unrelated to the claim. The tone is appropriately formal and analytical, typical of financial news reporting.

Overall assessment

Verdict (FAIL, OPEN, PASS): OPEN

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary: The narrative provides a timely update on the Pound to Euro exchange rate, incorporating recent data and developments. While the quotes from UK Finance Minister Rachel Reeves are original and exclusive, the reliance on a single source for the majority of the content introduces some uncertainty regarding the reliability of the information presented. The plausibility of the claims is supported by recent financial news reports, but the lack of specific factual anchors and the use of a single source warrant further scrutiny.

GBP/EUR exchange rate
UK economic data
Eurozone growth