EUR/GBP trims losses near 0.8700 as UK GDP disappoints

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The EUR/GBP cross pares recent losses near 0.8710 during the early European session on Thursday. The Pound Sterling (GBP) edges lower against the Euro (EUR) after the release of UK growth numbers.

EUR/GBP trims recent losses around 0.8710 in Thursday’s early European session.
UK preliminary GDP rose 0.1% QoQ in Q4 2025, weaker than expected.
Traders brace for the Eurozone Q4 GDP report, which is due later on Friday.

The EUR/GBP cross pares recent losses near 0.8710 during the early European session on Thursday. The Pound Sterling (GBP) edges lower against the Euro (EUR) after the release of UK growth numbers. The attention will shift to the preliminary reading of the Eurozone Gross Domestic Product (GDP) for the fourth quarter (Q4), which will be published later on Friday.

Data released by the Office for National Statistics (ONS) on Thursday showed that the UK economy grew 0.1% QoQ in the fourth quarter of 2025, compared to a 0.1% increase in the third quarter. This figure came in weaker than the estimation of a 0.2% rise in the reported period.

Meanwhile, the UK GDP expanded 1.0% YoY in Q4 versus 1.2% prior (revised from 1.3%). This reading was below the market consensus of 1.2%. The monthly UK GDP arrived at 0.1% in December, following a 0.2% growth in November (revised from 0.3%), in line with expectations. The GBP edges slightly lower in an immediate reaction to the downbeat UK GDP data.

The European Central Bank (ECB) decided to hold its benchmark interest rate steady at 2.0% for the fifth meeting in a row last week, as widely expected. Traders raise their bets that policy will be steady all year before possible rate hikes next year, which lifts the EUR against the GBP.

The preliminary reading of the Eurozone Gross Domestic Product (GDP) will be closely watched on Friday. Any signs of weakening in the Eurozone economy could drag the EUR lower against the GBP in the near term.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.