Pound to Euro Week Ahead Forecast: 1.15 Over Next 12 Months

June 8, 2025 - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: 1.15 Over Next 12 Months

Foreign exchange strategists at Rabobank expect the Pound to Euro exchange rate (GBP/EUR) to hit selling interest close to 1.19 and retreat gradually to 1.15 on a 12-month view.

MUFG also expects a GBP/EUR retreat to 1.15 by the first quarter of 2026, although it is having doubts over this forecast.

The bank commented; “We have maintained our view of pound depreciation versus the euro. We do however, see greater risks than a month ago that the pound could outperform our forecasts given the signs in May that the UK economy could prove stronger than expected and hence the MPC cuts by less.”

There is still a high degree of uncertainty over US trade policy.

The US increased tariffs on steel and aluminium imports to the US to 50% from 25% during the week, but it appears that the UK tariffs will be held at 25%.

Although there could be a limited net benefit for the UK economy, uncertainty will tend to underpin the Euro.

The ECB cut interest rates by 25 basis points following the latest council meeting which was in line with strong consensus forecasts.


The central bank expects that the boost to investment and defence spending will underpin growth.

In this context, there was more hawkish rhetoric with an indication that there would not be a cut in July. There were also greater market doubts whether there would be any further cuts.

Nordea commented; “We think the ECB is done cutting rates now, but this view is contingent on no major negative surprises surfacing and economic outlook to gradually become more robust in line with the ECB’s forecasts.”

Deutsche Bank still sees scope for further cuts; “Assuming we are right and trade war weighs on the economy in H2 and the underlying disinflation trend remains intact, then we think a further cut to 1.75% is justifiable in September. Whether the ECB will cut to 1.50% remains to be seen.

According to MUFG; “We still see the terminal rate at 1.50%, but acknowledge that risks are now skewed towards fewer cuts ahead after today’s update.”

There were no major UK developments during the week with Bank of England officials still backing a cautious stance.

Deutsche Bank expects steady rate cuts; “Despite elevated uncertainty around inflation, inflation expectations, and the MPC reaction function, we continue to think Bank Rate will be cut three times this year to 3.5% (Aug, Nov, Dec).


It added; “We see terminal rate at 3.25% in February 2026. Risks are skewed to fewer rate cuts this year, we think, and a higher terminal rate. And for the first time this cycle, we also think that the window for rate cuts may be starting to narrow.”

Wider UK fundamentals will also be monitored closely with the government spending review due to be presented on Wednesday.

According to Rabobank; “the Spending Review is likely to bring a reminder of the fragility of the UK’s fiscal situation and the difficulty that Chancellor Reeves will have in meeting her own rules if growth does not pick up.”

It added; “Also, while the EUR may be due a bout of profit-taking after this year’s move higher, Germany’s relatively better debt position and expectations for improved growth in 2026 should provide longer term support for the EUR.”

According to UBS; “In 2026, the EUR might get the upper hand with the ECB at the end of its easing cycle and the BoE likely to still need to loosen policy. The UK’s fiscal situation remains a risk that could weigh on the GBP’s outlook.”

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TAGS: Currency Predictions Pound Euro Forecasts