Pound to Euro Forecast: Sterling Losses to 1.15 on Bearish Technicals

May 7, 2025 - Written by Frank Davies

STORY LINK Pound to Euro Forecast: Sterling Losses to 1.15 on Bearish Technicals

The Pound to Euro (GBP/EUR) exchange rate spiked to 1-month highs at 1.1815 after the initial failure before a retreat to just below 1.1750 as markets also focus on the Bank of England policy decision.

German CDU leader Merz failed to be elected as Chancellor in the first Bundestag vote on Tuesday, but did secure a win in the second ballot.

According to ING; “We think EUR/GBP may stabilise around 0.850 for now (1.1765 for GBP/EUR) as a well-telegraphed BoE cut should not trigger major moves.”

CitiGroup, however, expects GBP/EUR losses; “Current levels offer good risk/reward for EURGBP longs, where technicals look bullish and the pair has lagged relative ECB-BoE pricing.”

It sees scope for GBP/EUR losses towards 1.1500.

The German coalition was able to amend procedures and Merz was confirmed in a second ballot with 325 votes, above the threshold of 316.

The vote provided initial Euro relief, but there are concerns that the initial rejection is an indicator of wider difficulties


According to ING, events; “are a painful reminder that it will be hard for the incoming government to fulfil the high expectations regarding investments and reforms. It seems that not everyone in the coalition parties has fully understood the sense of urgency towards the necessity of a functioning government.

It added; “Friedrich Merz and his government now face the monumental challenge of restoring economic strength while keeping everyone in their own parties aligned.”

Commerzbank also expressed concerns; “scepticism is appropriate with regard to the large fiscal package that the new government is planning and therefore also with regard to the euro."

As far as the UK is concerned, trade remains a key influence.

ING noted that a UK-India trade deal was announced on Tuesday and there is speculation that a US-UK deal could be reached this week.

According to the bank; “It's unclear whether London will be able to negotiate away the 10% baseline US tariffs, but it might be able to secure reductions in the 25% tariff rate on the car and steel sectors.”

ING also notes the importance of UK-EU relations; “Additionally, we're still focusing on the 19 May UK-EU summit – the first since Brexit. Warming relations with the EU typically sees sterling rally.”


The Pound has been hampered by expectations of a dovish Bank of England (BoE) policy statement on Thursday.

A 25 basis-point rate cut has been fully priced in, but there is the potential for dovish elements with the US tariffs a key factor for the BoE.

Commerzbank commented; “The BoE may lower its growth and inflation forecasts, while at the same time, as in February, there might be two dissenting votes for a larger move.”

BoE forecasts and guidance will be a key element.

Commerzbank added; “If the BoE does indeed remove the reference to gradual rate cuts from its statement, this would increase the scope for faster (and larger) rate cuts than previously expected - taking away one of the pound's few remaining supporting arguments.”

According to Citi; “GBP remains vulnerable to a pullback in equities, UK fiscal developments, spillovers from US term-premium concerns, and a dovish pivot from the BoE. While this week’s meeting is unlikely to offer that pivot, Citi Economics maintains the BoE will have to accelerate the pace of cuts in 2H25.”

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TAGS: Pound Euro Forecasts