Pound to Euro Forecast: GBP Trapped near 1.17 vs EUR

June 22, 2025 - Written by Frank Davies

STORY LINK Pound to Euro Forecast: GBP Trapped near 1.17 vs EUR

The Pound to Euro exchange rate (GBP/EUR) consolidated around 1.17 with improved risk conditions offset by evidence of a fragile economy and fears over further medium-term tax increases.

There will be ongoing reservations surrounding fiscal policy and the possibility of faster Bank of England interest rates, which will tend to hurt the Pound.

ING still sees scope for GBP/EUR losses to 1.1630.

UK equites posted gains after the US Administration suggested that any military strike on Iran could be delayed for up to 2 weeks to allow a last-minute diplomatic effort.

Economic data, however, offered no Pound support.

Retail sales volumes slumped 2.7% for May compared with consensus forecasts of a 0.5% decline. This was the sharpest fall since December 2023 and followed an upwardly-revised 1.3% gain for April.

Sales still increased 0.8% in the three months to May compared with the previous 3-month period.


Food stores sales volumes fell by 5.0% in May 2025 following growth of 4.7% in April while non-food sales declined 1.4%.

ONS senior statistician Hannah Finselbach commented; “Retail sales fell sharply in May with their largest monthly fall since the end of 2023. This was mainly due to a dismal month for food retailers, especially supermarkets, following strong sales in April.”

The latest data recorded a UK government borrowing requirement of £17.7bn for May compared with £17.0bn the previous year. Although close to consensus forecasts, this was the second-highest May deficit on record.

For the first 2 months of the fiscal year, the deficit increased to £37.7bn from £36.1bn the previous year.

According to Capital Economics; “We doubt it will get much better for the Chancellor anytime soon, as her £9.9bn buffer against her fiscal mandate may be wiped out at the Autumn Budget.”

It added; “The u-turns on benefit and welfare spending, downward revisions to the OBR’s productivity forecasts and higher borrowing costs may mean to maintain her current £9.9bn buffer, Reeves has to raise £13-23bn later this year. All this means tax rises are looking increasingly likely.”

The UK GfK consumer confidence index improved to -18 for June from -20 previously and compared with market expectations of no change. Consumers were more confident surrounding the overall economic outlook.


Neil Bellamy, Consumer Insights Director at GfK, commented; “Yet confidence is still fragile because the dark shadow of inflation is a day-to-day challenge for so many of us. With petrol prices set to rise in the coming weeks and with ongoing uncertainty as to the full impact of tariffs, there is still much that could negatively impact consumers. With so much volatility, now is certainly not the time to hope for the proverbial ‘light at the end of the tunnel’.”

Markets continue to debate the Bank of England outlook following Thursday decision to hold rates at 4.25%.

ING commented; “We only expect two cuts this year two cuts this year, but markets may be tempted on the dovish side by soft UK data, and we remain generally bullish in EUR/GBP in our multi-month view.

Danske Bank added; “We expect the BoE to stick to quarterly cuts, leaving the Bank Rate at 3.75% by YE 2025, which is aligned with market pricing.

It added; “Markets are pricing 50bp for the remainder of the year. However, we highlight that the risk is skewed towards a swifter cutting cycle in 2025 and 2026 given the downside risks to growth and the labour market.”

It expects gradual GBP/EUR losses with a 12-month forecast of 1.15.

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