Euro to Pound Sterling Forecast: 0.860 "on Cards" if no BoE Surprise

June 19, 2025 - Written by Frank Davies

STORY LINK Euro to Pound Sterling Forecast: 0.860 "on Cards" if no BoE Surprise

Pound to Euro Rate Slides to 7-Week Low as Oil Surges and UK Inflation Weighs

The Pound Sterling was hurt on Tuesday by a fresh surge in oil prices and there were further losses on Wednesday after the latest UK inflation data with the Pound to Euro (GBP/EUR) exchange rate sliding to fresh 7-week lows near 1.1680.

Risk conditions remain fragile amid increased speculation that the US Administration will decide to intervene in the Iran-Israel conflict by using bunker-busting bombs to penetrate Iran’s nuclear facilities hidden underground. There are also fears that oil shipments through the straits of Hormuz will be disrupted.

Equity markets, however, have been broadly resilient which limited the scope for aggressive Pound selling.

According to ING; “Geopolitical risks generally harm the pound more than the euro, and the data flow has been GBP-negative of late. Unless the BoE surprises with a more hawkish-than-expected message tomorrow, a move to 0.860 may well be on the cards.” (1.1630 for GBP/EUR).

The headline UK inflation rate edged lower to 3.4% for May from 3.5% previously, but slightly above consensus forecasts of 3.3%.

Last month’s rate would have been 3.4% given the error in calculating road tax changes.


The core rate declined to 3.5% from 3.8% previously which was in line with market expectations.

According to the ONS; “The largest downward contribution to the monthly change in both CPIH and CPI annual rates came from transport; the largest, partially offsetting, upward contributions came from food, and furniture and household goods.”

Air fares dipped sharply after a surge the previous month and fuel prices also declined.

Fuel prices, however, will increase again given the spike in oil prices and the decline in retail energy prices from July will also be short-lived if gas prices increase further.

Food and drink inflation increased to 4.4% from 3.4%, the highest rate for 16 months.

The goods inflation rate rose from 1.7% to 2.0% on the month while the services annual rate slowed from 5.4% to 4.7%.

The Bank of England (BoE) will remain wary over underlying inflation trends, but the decline in services-sector inflation will be a significant relief and evidence of a weaker labour market will offer significant reassurance that there will be a further slowdown in wages growth.


There are strong expectations that the BoE will hold interest rates at 4.25% at this meeting while there is also confidence that there will be a further cut at the August meeting.

ING commented; “The Bank of England’s recent hawkish turn has not been endorsed by data so far, as jobs, growth and now inflation figures have come in on the soft side. But it raises the risk of a slightly more dovish tone tomorrow; although not of a cut, which remains rather unlikely.”

Deutsche Bank, chief UK economist Sanjay Raja noted the difficult balancing act; “The focus now will turn to geopolitical events and the rise in energy prices. This will undoubtedly complicate the monetary policy committee’s task. Higher energy prices will mean higher inflation expectations.”

The inflation data will work in the opposite direction; “today’s data should help convince MPC members on the fence that price pressures are tracking as expected and underlying disinflation remains on track.”

Overall, he added; “Don’t expect a dovish pivot just yet – more data and more accumulation of evidence that the economy is returning to a sustainable equilibrium will be needed to push the MPC into a more dovish direction.”

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