The market movements of the Pound Sterling indicate a cautious stance ahead of the upcoming interest rate decision by the Bank of England (BoE). In recent weeks, the British pound has stabilized against the euro at around 0.84 EUR/GBP, marking a recovery. This development is significantly influenced by the expectation that the BoE will not implement further interest rate cuts for now. The core inflation in the UK remained high at 3.8% in April, which, along with rising wages, leads to higher selling prices for businesses.
Factors of Pound Strength
The fundamental factors favor a relative strength of the pound in the summer semester: a solid domestic economy, increased lending, and robust consumer demand create a favorable growth environment. Since inflation is above the target level, it is likely that the BoE will adopt a cautious approach to its monetary policy and refrain from further interest rate cuts.
Current Exchange Rate Data
Current exchange rate data confirm this stability: The Euro-Pound exchange rate hovers around 0.84 to 0.85 EUR/GBP in June 2025, while other sources report a slight increase of the pound against the euro, for example, at the savings bank with about 0.865 GBP per euro on June 16.
Implications for Investors
For investors, this means:
- Cautious market movements reflect uncertainty regarding the interest rate decision.
- A refraining from further interest rate cuts by the BoE could strengthen the pound.
- Exchange rates are likely to remain relatively stable or lean slightly in favor of the pound.
- Investments in British assets may benefit from this relative currency strength.
Overall, the behavior of the Pound Sterling before the interest rate decision of the Bank of England is an indicator of a wait-and-see attitude in the market, with simultaneous potential for moderate appreciations due to a more restrictive monetary policy than previously expected.