Pound-to-Euro Forecast: GBP/EUR Lower Ahead of Bank of England

June 18, 2025 - Written by Frank Davies

STORY LINK Pound-to-Euro Forecast: GBP/EUR Lower Ahead of Bank of England

The Pound to Euro exchange rate (GBP/EUR) has failed to make any headway on Tuesday and settled around 1.1725, close to 7-week lows. There was no support from the US-UK trade deal, with positive Euro-Zone data helping to underpin the Euro.

GBP/EUR is liable to dip further and potentially break 1.1700 support if Wednesday’s UK inflation data is weaker than expected.

Conversely, stronger-than-expected data could trigger a spike towards the 1.1800 area.

Consensus forecasts are for the headline rate to decline to 3.3% from 3.5,% with the core rate retreating to 3.5% from 3.8%.

Middle East developments remain important for the currency. Equity markets have lost ground, which hampered Sterling to some extent, while there has also been an element of Pound selling as traders anticipate a dovish Bank of England statement on Thursday.

Nick Rees, head of macro research at Monex Europe, commented, "The pound is trading largely in line with its relative sensitivity to risk, so a little bit more risk sensitive than the euro."

If equity markets rebound, there will be some net Pound support, while further losses would undermine support.


There are strong expectations that the Bank of England will hold interest rates at 4.25%, but the statement and guidance will be crucial.

According to ANZ, “The data paint a bleak outlook for the labour market in the coming months. However, wage growth has been slow to normalise.”

It added, “We expect wage growth to ease soon, reflecting the weak underlying labour market. This drives our view that overall service price disinflation will gain pace, allowing room for the MPC to cut the policy rate in the second half of this year.”

Credit Agricole is confident that rates will be held at 4.25% with little change in guidance; “We expect close-to-unanimous MPC support for stable rates to corroborate that view.”

It added that the decision, “could give a boost to the GBP’s rate appeal and support the currency, especially vs the EUR.”

Credit Agricole is also cautious on the Euro; “The EUR continues to trade at a premium relative to its relative rate disadvantage across the board and could be vulnerable to bouts of profit taking on long-EUR positions.”

On Monday, US President Trump signed an executive order to update the proposed US-UK trade deal.


There will be an annual quota of 100,000 UK vehicle exports to the US with a 10% tariff. The UK also secured a removal of tariffs on the UK aerospace industry.

Although there are plans to cut tariffs on steel and aluminium exports to the US, there is no deal at present. There will be negotiations to secure preferential treatment on pharmaceuticals.

The German ZEW investor confidence index strengthened sharply to 47.5 for June from 25.2 the previous month and well above consensus forecasts of 35.0.

The current conditions index also improved to -72.0 from -82.0 previously and is slightly above market expectations.

The wider Euro-Zone index also improved sharply to 35.3 from 11.6 in May.

ZEW President Professor Achim Wambach commented, “Confidence is picking up. Recent growth in investment and consumer demand has been a contributing factor. This development also seems to strengthen the assessment that the fiscal policy measures announced by the new German government can provide a boost to the economy.”

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TAGS: Pound Euro Forecasts