Because political issues and elections can affect the value of the GBP, Brexit — or Britain’s proposed exit from the European Union — in June 2016 has negatively affected the GBP against several currencies. We saw the euro jump from 0.79008 against the pound in June 2016, shortly after the Brexit referendum, to 0.841735 in July 2016. Since July 2016, the euro has traded between 0.83 to 0.92 to the pound.
How does the euro trade against the British pound historically?
On January 1, 1999, the euro was introduced in 11 states of the European Union (EU) as a single currency. Despite being an EU member state, the UK kept its currency as the British pound. At the time of its debut, the trade rate was 1.42 euros to one pound.
From 1999 to 2007, the euro held a stable value average of 0.6 against the pound. However, in late 2008 the euro became caught up in the European sovereign debt crisis, which led to an increase of 0.70 pounds to one euro by the end of that year.
In an attempt to stabilize the euro, the European Financial Stability Facility was created to address the crisis. Rates improved as a result, reaching 0.93 GBP to 1 EUR by October 13, 2009. The British pound remained stable up until the end of 2015, bottoming at 0.71 and recovered to 0.92 in August 2020. In September 2022, GBP fell heavily against all major currencies in reaction to a “mini-budget” that included major tax cuts to businesses and high income earners.
What is the European sovereign debt crisis?
The European debt crisis began when Greece, Spain, Ireland, Portugal and Cyprus couldn’t afford to repay their government debt due to slowing economies and rising interest rates, among other economic issues.
EUR to GBP exchange rate history
We’ve put together the average exchange rate for the euro against the pound sterling for the past week.
1 EUR =
Average exchange rate over the past 6 months.
1 EUR =
Average exchange rate over the past 5 years.
1 EUR =
What affects EUR to GBP exchange rates?
In general, five factors affect how the euro trades against the British pound.
Prices and inflation
Inflation affects all currencies, including the euro. Countries with high levels of inflation relative to other countries will typically see its currency depreciate so that the prices of goods between countries remain equal. In the eurozone — or the group of nations that trade in the euro — inflation is measured by the Consumer Price Index (CPI), which calculates the price of a selection of goods that an average household is likely to purchase.
Confidence and sentiment
By looking at confidence and sentiment reports, you can also gauge economic conditions in countries that trade in the euro. A popular sentiment report to follow is the German ZEW Survey, prepared each month by the Center for European Economic Research.
All currency is affected by monetary policies, which are constructed by currencies respective to a country’s central bank. For the euro, that’s the European Central Bank. Monetary policies include interest rates that significantly affect the euro.
The growth and health of the eurozone significantly influences the euro, measured by the gross domestic product. For the eurozone, the GDP is a periodic measure of the value of the total goods and services produced in the area. For all currencies, including the euro, growth in GDP is a sign that the economy is strong and healthy.
Balance of payments
The balance of payments is like a country’s accounting record of interaction with the rest of the world. It’s made up of three accounts, but only the current account affects exchange rates. This account reveals how much a country is exporting and importing, as well as the flow of income and transfer payments.
Did you know?
The EUR to GBP currency pair is often referred to by forex traders as trading the “Chunnel.” It refers to the Channel Tunnel that connects Great Britain with Europe.
When transferring money internationally, do your research to ensure that your money goes further in an exchange. With Brexit and other current events, the British economy is shaky — which could mean a better deal when converting your euros to pounds.
Frequently asked questions
Hundreds of economic indicators can affect the euro, but the five we’ve highlighted — prices and inflation, confidence and sentiment, monetary policy, economic growth and balance of payments — are the most influential.
No, the euro is the world’s second most traded currency after the US dollar.