GBP/EUR: Key Strategies for Trading the Pound to Euro Exchange Rate in Forex

What is the GBP/EUR pair and why does it matter?

The Pound Euro cross (GBP/EUR) measures how many euros you need to buy one British pound. If it quotes at €1.17, it means 1 pound equals 1.17 euros. As a minor currency pair, it especially attracts traders from the UK and Europe, and its volatility has increased significantly since the Brexit vote in 2016.

As of February 2023, the GBP to euro exchange rate was around €1.120, with a -1.45% decline in the last month and -2.03% over three months. The 52-week range oscillated between €1.0786 and €1.2190, reflecting a dynamic but predictable market.

Factors Moving the GBP to Euro Exchange Rate

Three main elements determine the direction of EUR/GBP:

Divergent monetary policies: The Bank of England and the European Central Bank (ECB) have adopted similar interest rate hike strategies to contain inflation. However, any misalignment in their decisions causes sharp movements in the GBP to euro exchange rate. If the ECB accelerates its hikes while London slows down, the euro will gain ground.

Market sentiment and Brexit: Since 2016, uncertainty over UK-EU trade negotiations has kept the pound under downward pressure. The latest OECD economic forecasts indicate zero growth expected for the UK in 2023, while the eurozone anticipates a modest recovery. This macroeconomic gap favors the euro.

Geopolitical events: The Russia-Ukraine war and its inflationary effects have impacted both regions differently, altering growth and interest rate expectations.

GBP to Euro Exchange Rate History: 2016-2023

Before Brexit, the GBP to euro exchange rate traded above 1.30€. The 2016 vote triggered the largest daily drop in the pound in 30 years. Since then, it has mostly moved between €1.06 and €1.21.

In 2022, the year started near the upper end (€1.21) but fell toward the lower end. Trade frictions, political uncertainty, and mass selling of assets denominated in pounds deepened the depreciation. Analyzing more recent periods makes more sense than looking at data from 2000 or 2008, as conditions have changed radically.

Looking back 10 years, the pound was at much higher levels against the euro. However, expecting it to return to historic highs (€1.752 in May 2000) is impractical: markets evolve, and what matters is operating within current ranges.

Why the GBP to Euro Exchange Rate Attracts Traders

Trading this pair offers opportunities because it combines:

• High liquidity: EUR/GBP is very liquid, although GBP/EUR is less so. The liquidity differential creates predictable deviations.
• Moderate but consistent volatility: Unlike emerging currencies, the GBP to euro exchange rate does not suffer erratic jumps, but enough oscillations to generate profits.
• Major assets: Both currencies represent global financial centers, so macroeconomic data on GDP, inflation, unemployment, and interest rates drive interpretable movements.

Practical Strategies for Trading GBP/EUR

Use Contracts for Difference (CFD)

You don’t need to physically hold pounds or euros. With a CFD, you speculate on the price direction without buying the currencies. If you think it will rise, open a long position; if you expect a fall, open a short position. Profit is the difference between entry and exit prices.

Timing: Key European Hours

Trade the GBP to euro mainly during the London session (08:00-17:00 local time). This period accounts for 35% of daily Forex volume and generates the highest volatility. Avoid trading during London night hours if you seek optimal conditions.

Constantly Monitor Economic News

Any announcements on Bank of England rates, expected inflation, employment data, or ECB decisions can move the pair. Stay updated on the UK and Eurozone economic calendar.

Analyze Trends with Technical Tools

Use valuation analysis or trend technical indicators. Watch if the GBP to euro breaks support (€1.06) or resistance (€1.21) levels. Breakouts often confirm trend changes.

Risk Considerations

There are no guarantees of profits in Forex. Invest only what you can afford to lose. Although volatility in GBP/EUR is moderate, it can lead to quick losses with leverage. The GBP to euro exchange rate is subject to unpredictable political and economic surprises.

Although the pound has recently stabilized within the range €1.08-€1.21, the Bank of England maintains a cautious stance that pressures the currency downward. The next five quarters could bring recession in the UK, further complicating any recovery of the pound against the euro.

Conclusion

The GBP to euro exchange rate is one of the most watched and tradable pairs in the Forex market. Its combination of liquidity, moderate volatility, and interpretable economic factors makes it attractive for disciplined traders.

To succeed trading GBP/EUR, master the basics: understand that you are trading how many euros per pound, stay updated with economic news from both regions, trade during peak hours, and use technical analysis to identify entry/exit points. Remember that market sentiment remains dominated by Brexit uncertainty and interest rate differentials between the two central banks. With a clear strategy and rigorous risk management, the GBP to euro exchange rate can be a profitable instrument in your Forex portfolio.