Pound sterling is issued by the Bank of England, which has been issuing banknotes for over 300 years and reports over 4.98 billion notes in circulation worth about £91.5 billion; six commercial banks in Scotland and Northern Ireland also issue sterling notes under asset-backing rules the Bank supervises. The euro is issued by the Eurosystem — the European Central Bank holds the exclusive right to authorise the issue of euro banknotes under Article 128(1) TFEU, and euro banknotes and coins are legal tender in 21 of the 27 EU Member States. In ISO 4217, GBP is numeric 826 and EUR numeric 978; both carry two minor units, so both settle to the penny and the cent respectively.

GBP/EUR is a rare thing in foreign exchange: a heavily traded pair with no US dollar in it. The BIS Triennial Central Bank Survey for April 2025 noted that the ten most traded currency pairs all involve the US dollar, and recorded EUR/GBP at 1.8% of global OTC turnover. What sits behind that is proximity. Eurostat recorded 2025 EU goods exports to the United Kingdom of €345.3 billion against imports of €158.7 billion, making the UK the EU’s third-largest goods partner in both directions, and reported the UK as the EU’s second-largest services partner in 2024, with EU services exports of €294 billion and imports of €248 billion. People and residence follow: the ONS estimated 42.6 million visits to the UK by overseas residents in 2024 and 94.6 million visits abroad by UK residents, and Eurostat estimated 14.1 million people living in one EU country as citizens of another on 1 January 2025.

Two independent inflation-targeting central banks, neither of which sets this rate. The Bank of England’s primary monetary policy objective is low and stable inflation, in practice 2% over the medium term, and it states outright that it does not set the exchange rate for the pound, which "is decided by supply and demand" — while noting that a higher Bank Rate leads investors to demand more pounds relative to other currencies. The ECB’s stated main aim is to maintain price stability, and it describes the same channel from the other side: short-term interest rate differentials influence the exchange rate through portfolio rebalancing and cross-border capital flows. Because both economies are large services exporters to each other, trade in services is a bigger part of the underlying demand here than it is on most pairs.

This is the pair where conversion cost is most visible by law. Since 19 April 2020, Regulation (EU) 2019/518 has required payment service providers, and parties providing currency conversion at an ATM or point of sale, to express total currency conversion charges as a percentage mark-up over the ECB’s latest euro reference rates, and to make those mark-ups public. The payer must also be told the amount payable in both currencies and that they may pay in either — which is the rule that makes "would you like to pay in your own currency?" at a terminal a comparable question rather than a blind one. On the sterling side the Bank of England publishes indicative middle-market rates around 4pm and states they "do not constitute any form of official rates". Neither published rate is the rate you will be given; both are the yardstick for measuring it.