Pound-to-Euro Forecast: GBP/EUR Gains Above 1.1900 say Analysts

May 21, 2025 - Written by Frank Davies

STORY LINK Pound-to-Euro Forecast: GBP/EUR Gains Above 1.1900 say Analysts

The Pound Sterling-to-Euro (GBP/EUR) exchange rate briefly spiked after the UK inflation data before a retreat to 1-week lows around 1.1835.

Markets have ruled out the potential for a further Bank of England rate cut at the June policy meeting. In contrast, the ECB is expected to cut rates again, reinforcing the Pound’s yield advantage.

There has, however, been further evidence of strong capital flows into the Euro and the Pound has been punished by a persistent failure to break resistance around 1.1900.

Thursday’s UK and Euro area business confidence data will be a key marker for currency markets.

According to ING the Pound outlook is still favourable despite a setback; “We think a break below 0.840 remains a tangible possibility in the coming weeks.” (GBP/EUR gains above 1.1900).

Credit Agricole commented; “we like to express any constructive view on the GBP via long positions against lower yielding currencies like the EUR.”

Danske Bank expects capital flows will favour the Euro with GBP/EUR retreating to 1.15 on a 12-month view.


The headline inflation rate jumped to 3.5% for April from 2.6% previously which was above consensus forecasts of 3.3% and the highest reading since February 2024.

The core rate also increased to 3.8% from 3.4% and above market expectations of 3.6%.

The goods inflation rate increased to 1.7% from 0.6% while the services-sector rate jumped to 5.4% from 4.7%.

Airfares rose by 27.5%, the second-highest monthly rise for an April since records began amid a late Easter, and there was a big impact from changes in road tax.

The 10-year yield jumped to a 6-week high near 4.80%.

Markets have ruled out a June BoE rate cut and investment banks are less confident that there will be two further rate cuts this year.

British Chambers of Commerce (BCC) research manager Stuart Morrison expressed unease over cost pressures; “Businesses are facing a perfect storm of cost pressures which is fuelling inflation alongside rising household bills. While April’s jump was expected, the scale, to 3.5pc, is concerning.”


ING commented; “Services inflation should fall back from April’s 5.4% figure to the 4.5% area this summer, keeping the Bank of England on track for quarterly rate cuts through this year and into 2026.”

According to Deutsche Bank chief UK economist Sanjay Raya; "Big picture, this is not the end of a quarterly cutting cycle – not yet at least."

He added; "While the bar may be higher for an August rate cut than previously thought, it's likely that the majority of the MPC will look past this if inflation expectations start to recede, the labour market continues to loosen as we expect, and pay settlements continue to come in lower."

Pantheon Macroeconomics chief UK economist Rob Wood commented; “We think the MPC will have to proceed cautiously. We stick with two more rate cuts this year, but are very close to reducing that to only one.”

He added; “Cuts on a precise quarterly schedule — August and November — are also far from certain. Opportunistic ‘skips’ by the MPC are possible.”

On Tuesday, the Euro-Zone recorded the second-largest current account surplus on record.

Inflows over the past year are running at record levels, although domestic investors have also been strong buyers of overseas assets.

MUFG commented; “what the data does indicate in general is that foreign investors, both equity and fixed income, have returned to the euro-zone markets.”

Net inflows will underpin the Euro.

The latest European business confidence data will be released on Thursday.

According to Danske Bank; “A cause of concern is, however, the stagflationary tendencies from the PMIs.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts