Euro Hits 1-Year Low vs Pound on Soft Inflation

Key Moments

EUR/GBP trades around 0.8598, marking its weakest level since July 2025.
Eurozone headline HICP inflation slows to 2.8% YoY in June, missing the 3.0% forecast and down from 3.2% in May.
ECB and BoE policy signals and UK political uncertainty shape market expectations for future rate moves.

Euro Weakens After Eurozone Data Surprise

The Euro (EUR) is under pressure against the British Pound (GBP) on Wednesday after weaker-than-expected Eurozone inflation data dampened expectations for another interest rate increase by the European Central Bank (ECB) this year.

At the time of writing, EUR/GBP is trading close to 0.8598, its lowest level since July 2025, reflecting a marked decline in the common currency against sterling.

Market participants are also positioning ahead of speeches from ECB President Christine Lagarde and Bank of England (BoE) Governor Andrew Bailey, who are scheduled to speak later on Wednesday at the ECB Forum in Sintra.

Eurozone Inflation Cools More Than Forecast

Data from Eurostat showed that the preliminary Harmonized Index of Consumer Prices (HICP) rose 2.8% year-on-year in June, slowing from 3.2% in May and coming in below the 3.0% consensus forecast. On a monthly basis, HICP declined 0.1%, compared with a 0.1% increase in the previous month.

Core HICP, which strips out food and energy, eased to 2.4% year-on-year in June from 2.6% in May. On a monthly basis, core prices increased 0.2%, following a 0.3% gain in the previous month.

With inflation indicators pointing to further cooling and Oil prices back near pre-US-Iran war levels, traders are increasingly questioning whether the ECB will find it necessary to deliver another rate hike before year-end.

ECB Officials Signal Caution Despite Cooling Pressures

Despite the softer inflation backdrop, ECB policymakers continue to stress ongoing risks around price stability.

ECB Governing Council member Joachim Nagel said he would “keep options open for July, September decisions,” while warning that inflation “will stay on a high level this year” and “will stay above target in 2027.”

ECB Governing Council member Martin Kocher commented that the “inflation threat is lower, not completely contained,” and noted that the next policy outcome would be “either hike or hold.”

UK Politics and BoE Stance Under Investor Scrutiny

On the UK side, political developments are in focus after Prime Minister Keir Starmer’s resignation last month. Markets are assessing whether frontrunner Andy Burnham would preserve fiscal discipline if he becomes the next prime minister.

At the same time, the BoE’s monetary policy path remains a key factor for GBP. BoE Governor Andrew Bailey stated on Tuesday that UK inflation could still rise to 3.2% later this year. Bailey added that “financial conditions have tightened, giving the BoE time to evaluate whether it needs to raise the Bank Rate.”

Euro Performance Against Major Currencies

The table below shows the percentage change of the Euro (EUR) today relative to major counterparts. According to the figures, the Euro has been strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.41%	0.19%	0.08%	0.23%	0.37%	0.19%	0.36%
EUR	-0.41%		-0.23%	-0.31%	-0.17%	-0.03%	-0.23%	-0.05%
GBP	-0.19%	0.23%		-0.11%	0.06%	0.17%	-0.03%	0.19%
JPY	-0.08%	0.31%	0.11%		0.13%	0.29%	0.07%	0.27%
CAD	-0.23%	0.17%	-0.06%	-0.13%		0.15%	-0.07%	0.14%
AUD	-0.37%	0.03%	-0.17%	-0.29%	-0.15%		-0.21%	-0.01%
NZD	-0.19%	0.23%	0.03%	-0.07%	0.07%	0.21%		0.20%
CHF	-0.36%	0.05%	-0.19%	-0.27%	-0.14%	0.00%	-0.20%

The heat map is read using the base currency from the left column and the quote currency from the top row. For instance, selecting the Euro from the left column and moving horizontally to the US Dollar cell provides the percentage move for EUR (base)/USD (quote).