Pound Edges Higher as German Factory Data Fails to Lift Euro

The pound edged higher against the euro Monday, with GBP/EUR trading at €1.1686, as fading UK political uncertainty outweighed a stronger-than-expected rebound in German factory orders.

The move was modest – less than 0.1% – but the direction mattered. Sterling has been grinding higher since early June as the risk premium attached to UK political instability has narrowed. A snap election called by Prime Minister Rishi Sunak in late May initially rattled markets. Polls showing a comfortable Conservative lead have since calmed nerves.

German factory orders rose 1.2% in April, beating the 0.5% consensus estimate. The data, released Monday morning, briefly pushed EUR/USD higher and weighed on GBP/EUR. The euro gave back those gains within two hours. Traders said the market was already leaning short ahead of Thursday's European Central Bank policy meeting.

The ECB is widely expected to cut its deposit rate by 25 basis points. That move would narrow the rate differential between the euro and the pound. The Bank of England, by contrast, is seen holding rates steady through the summer. Markets price the first UK cut in September.