Euro Pulls Back from Weekly Highs Against the British Pound as Strong UK Data Supports Sterling

Last Updated on 11/09/2026

• EUR/GBP slips below 0.8590 after reaching intraday highs near the 0.8600 mark.
• Better-than-expected UK GDP and Industrial Production figures have strengthened support for the Pound.
• The Euro posted modest gains on Thursday after the European Central Bank raised interest rates.

The British Pound gained support on Friday after stronger-than-expected economic data from the UK. Gross Domestic Product (GDP) expanded by 0.4% in July, surpassing forecasts for no growth and improving on June’s 0.3% increase. Industrial Production also returned to growth, rising 0.2% after declining by the same amount in June. Meanwhile, Manufacturing Production climbed 0.9%, marking its strongest performance in four months and significantly exceeding expectations for a 0.2% increase following June’s 0.5% contraction.

Additional data reinforced the positive outlook for the UK economy. The Index of Services increased by 0.6% in the three months to July, outperforming forecasts of 0.5%. At the same time, the UK’s Goods Trade Balance deficit narrowed to GBP 20.96 billion from GBP 23.00 billion in June, beating expectations for a deficit of GBP 22.3 billion.

ECB Raises Rates and Signals More Tightening Ahead

In the Eurozone, the European Central Bank (ECB) delivered a widely expected 25-basis-point interest rate increase on Thursday, lifting its Deposit Facility Rate to 2.5% for the second consecutive meeting. The move comes as policymakers continue to respond to inflationary pressures driven largely by elevated energy costs.

ECB President Christine Lagarde also indicated that the energy-related inflation shock linked to the Middle East conflict could persist through 2027. She noted that inflation is not expected to return to the ECB’s 2% target until the end of next year. Her remarks reinforced expectations that at least one additional rate hike may be required over the coming year, helping to underpin demand for the Euro.

By contrast, the Bank of England is widely expected to leave interest rates unchanged at its policy meeting next week. Analysts at Rabobank noted that while the voting outcome of the July 30 meeting appeared more hawkish than anticipated, there remains a significant hurdle for policymakers favoring tighter monetary policy. As a result, the bank believes the majority of the committee remains cautious about supporting further rate increases in the near term.