Pound-to-Euro Forecast: EUR and GBP on a Roll vs Dollar

June 27, 2025 - Written by Frank Davies

STORY LINK Pound-to-Euro Forecast: EUR and GBP on a Roll vs Dollar

The Euro and Pound have both advanced strongly against the dollar over the past 24 hours.

Although the Pound to Euro (GBP/EUR) exchange rate has not been able to make any headway over the past 24 hours, it has been broadly resilient in the face of Euro strength and disappointing data with consolidation around 1.1720.

This is close to the middle of the range which has been in play since the beginning of April.

Fiscal policy is a significant underlying element for currency markets.

MUFG noted that the German government is planning to increase borrowing by around EUR500bn in the period until 2029 with increased defence spending a key component.

It commented; “The significant shift to looser fiscal policy will help to provide more support for growth in Germany in the coming years which alongside additional debt issuance will support relatively higher government bond yields. It is another important reason why the euro has already strengthened so much against the US dollar this year.”

Nomura was cautiously optimistic; “The new budget is likely to meaningfully improve the economic trajectory. But in the near-term challenges from overseas (tariffs) and from within (demographics) will likely still weigh on growth."


ING commented; “The euro might have drawn marginal support from NATO agreeing on the 5% defence spending target and Trump sounding broadly conciliatory towards its allies (with the exception of Spain).”

In contrast, the UK government is still embroiled in a battle with its own party over planned curbs to welfare spending.

Given the size of the potential Labour Party rebellion, it is highly likely that next week’s planned vote will be postponed or abandoned.

Trade developments will also be monitored closely ahead of key deadlines next month with unease over the risk of US tariffs and EU retaliation liable to hamper the Euro.

According to Standard Chartered; “Our base case remains that a framework deal or memorandum of understanding can be agreed by the 9 July deadline that allows for an extension of negotiations and US tariffs at their current rates. However, the EU will likely calculate that it needs to increase its economic leverage to ensure the best possible trade deal.”

It added; “At the very least, we are likely to see stronger threats of retaliation from the EU, including broadening the range of potential targets to include US services."

Domestically, the CBI retail sales index deteriorated sharply to -46 for June from -27 previously and well below consensus forecasts of -24. This was the ninth successive monthly decline and retailers expect a steeper rate of decline next month.


CBI Principal Economist Martin Sartorius commented; “Retail sales volumes fell rapidly in the year to June, extending the recent downturn into its ninth consecutive month. The contraction in retail was mirrored across wholesale and motor trades, with many firms reporting that consumer caution continues to hold back sales.”

There was still some optimism that wider consumer spending would hold firm with increased support from the leisure sector.

Bank of England Governor Bailey continued to emphasise the key element of uncertainty and the case for gradual rate cuts.

He noted; "In recent months, the evidence that slack is opening up has strengthened, especially in the labour market,"

while adding; “But there remain uncertainties around the overall balance between supply and demand in the economy as well as the remaining inflation persistence in the system."

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TAGS: Pound Euro Forecasts