Pound to Euro Forecast: Retreat to 1.1560 by end of 2025

June 29, 2025 - Written by David Woodsmith

STORY LINK Pound to Euro Forecast: Retreat to 1.1560 by end of 2025

The Pound-to-Euro exchange rate (GBP/EUR) hit 2-week highs just above 1.1750 early on Friday before settling just above 1.1730 with the Euro and Pound Sterling both holding firm in global markets.

Risk appetite remains firmer amid gains for equities with the global index close to record highs.

The solid risk tone tends to underpin Sterling with the Pound and Euro both gaining support from a decline in gas prices with UK prices at the lowest level since early May.

Existing yield will underpin the Pound, but there are expectations that yield spreads will narrow over the remainder of 2025. The Bank of England is expected to cut rates while there are growing doubts whether the ECB will move again.

MUFG expects GBP/EUR will stall around 1.19 on a short-term view and retreat to 1.1560 at the end of 2025.

Commenting on equities, Vasileios Gkionakis, senior economist and strategist and Aviva Investors commented; What we are having right now is potentially some optimism about some trade deals."

He added; "To a certain extent we have also had some mini-selloff on the back of the events in the Middle East, and in that sense we’re rebounding. I think it’s very early days, but I think there is a sense in the market that we are getting a bit fatigued with the theme of trade, and trade wars and trade deals, and would like to move past that.”


Confidence in the Euro-Zone industrial sector dipped again in June with a small net improvement in the services sector.

Consumer confidence edged lower and the overall business and consumer confidence index retreated to 94.0 from 94.8 the previous month and below consensus forecasts of 95.0.

As far as inflation is concerned, the French headline rate increased to 0.9% compared with market expectations of no change at 0.7% while the Spanish rate increased to 2.2% from 2.0%, also above forecasts of no change.

German and Euro-Zone inflation data is due to be released early next week.

The inflation data is likely to encourage the ECB to keep interest rates unchanged at the July meeting.

ING commented; “We are not major subscribers to the view that the ECB will stay on hold until December (a September cut is underpriced in our view), but admit that the latest hawkish communication means market pricing may not be revised significantly to the dovish side at least for some weeks.”

The shift in ECB pricing will leave the Pound much more vulnerable if there is a shift in Bank of England expectations.


Domestically, the main focus has been on the government U-turn on welfare changes. Details are still missing at this stage, but the changes will inevitably limit the scope to curb overall welfare spending.

In this context, there is the risk that fiscal concerns will again become a serious market talking point.

Inflation and fiscal developments will also be important for the Bank of England.

Commerzbank analyst Michael Pfister noted dilemmas for the central bank; "Core inflation in the UK has basically stopped moving for the past year – hard to say why. BoE officials are quite concerned. That makes it difficult to cut rates and also the economic outlook is not improving."

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TAGS: Currency Predictions Pound Euro Forecasts