Pound to Euro Forecast: GBP/EUR Below Key Level Amid Bond-Market Wobble

May 19, 2025 - Written by Tim Boyer

STORY LINK Pound to Euro Forecast: GBP/EUR Below Key Level Amid Bond-Market Wobble

The Pound-to-Euro exchange rate is trading around 1.1880 and again held below the 1.1900 level.

The Pound has gained some limited net support from the UK-EU deal, but unease over concessions and the small print could re-ignite domestic political division. Renewed tensions in global bond markets has also limited the scope for GBP/EUR gains amid UK budget reservations and fresh evidence of defensive Euro support.

ING is now less confident that GBP/EUR can break through 1.19 in the short term.

The UK has secured concessions on food and farm exports to the EU in return for agreeing unchanged EU fishing quotas for the next 12 years.

A security and defence pact has been agreed while there will be discussions on youth mobility.

Equities lost ground on Monday and there was renewed selling in UK bonds with the 10-year yield near 5.70% and close to 5-week highs.

Brad Bechten of Jefferies commented; “The UK on a roll these days with yet another trade agreement. First it was India and the UK and then the US and UK, and now we see something between the UK and EU.”


He added; “all very positive for the UK on a longer term horizon. Not sure it will do much for the GBP or the UK economy in the here-and-now but longer term it will definitely be supportive.”

According to Bank of America; “UK/EU Reset Summit likely to mean a small improvement in EU/UK relations.”

ING commented; “Monday's European deal with Britain is a positive first step, but it won’t massively boost the economy, nor help avoid tax rises in the autumn. Further regulatory alignment might do that and would help boost sterling. But existing UK and EU red lines make that a daunting task.”

It expects GBP/EUR to trade in a 1.1765 - 1.1900 range over the Summer.

Neil Wilson, UK investor strategist at Saxo Markets expects that global developments will have a much greater impact; "I feel like this is a little ripple to the main tidal wave of U.S. debt selloff and dollar-led moves – gilts are getting hammered and no amount of fish is going to fix that."

As far as the UK economy is concerned, Rabobank noted stronger than expected UK GDP data last week, but remained cautious; “There are signs of underlying resilience in this report, but recent data such as PMIs and labour market surveys since the April tax and trade changes point to a sharp slowdown in Q2.”

In this context, the latest business confidence data this week will be very important for confidence in the UK and Euro-Zone economies.


At this stage, markets expect a slight uptick in the Euro-Zone and UK releases for the manufacturing and services sectors.

As far as other UK data is concerned, the headline inflation rate is expected to increase sharply to 3.3% from 2.6% with the increase in energy prices a key element.

The core rate is forecast to increase to 3.6% from 3.4%.

Stronger data would make it more difficult for the Bank of England to cut interest rates again in the near term.

Tariffs will sap Euro-Zone economic growth. In its new spring forecasts, the Commission cut its eurozone growth forecast this year to just 0.9%, down from 1.3% forecast last November.

Weaker growth and US-EU friction will hamper the Euro.

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TAGS: Pound Euro Forecasts