Pound to Euro Forecast: EUR can see Further Gains from Here

June 30, 2025 - Written by Tim Boyer

STORY LINK Pound to Euro Forecast: EUR can see Further Gains from Here

After hitting 2-week highs just above 1.1750 last week, the Pound to Euro exchange rate (GBP/EUR) dipped to near 1.1680 on Monday despite a stronger reading for business confidence.

MUFG commented; “Recent developments therefore suggest the outperformance of the pound is at risk of petering out. Given our bearish US dollar view, pound depreciation will be more evident versus non-dollar currencies. EUR/GBP can see further gains from here.” (GBP/EUR losses)

MUFG has a year-end GBP/EUR forecast of 1.1560.

The Pound has not been able to take advantage of benign risk conditions amid expectations of underlying capital flows into the Euro area.

Domestically, the Lloyds Bank business barometer edged higher to 51% for June from 50% the previous month and the strongest reading since 2015. Economic optimism also hit a 10-month high.

There have been mixed signals on the labour market. The Lloyds survey reported that there had been a surge in hiring intentions for June with 60% of businesses expecting to increase staffing levels over the next year.

The survey also recorded that wage growth expectations rose for a second month in a row, countering recent evidence of a weak labour market.


Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking commented; “The rebound in business confidence suggests that firms might be in a stronger position for the next quarter.”

She added; “The rise in confidence is driven by a sharp increase in economic optimism, reflecting the recovery in financial markets amid the easing of global trade tensions.”

Elsewhere, mortgage approvals increased to 63,000 for May from a revised 60,700 and above consensus forecasts of 61,000, but there was a significant slowdown in consumer credit growth.

GDP growth was confirmed at 0.7% for the first quarter of 2025.

Capital Economics deputy chief UK economist Ruth Gregory commented; “The latest GDP figures do not change our view that the economy will grow by just 1.0% this year, which would be no better than last year and a little weaker than the consensus forecast.”

On Tuesday, the government is due to hold a vote on the welfare reform bill in parliament. Concessions by the government have lessened the risk of government defeat, but there will still be significant opposition in the House of Commons.

In this context, there will be further concerns over underlying upward pressure on borrowing.


MUFG commented; “The combined cost of these u-turns makes it increasingly likely that Chancellor Reeves will have to raise taxes in the autumn budget.”

The bank also considers the risk of faster Bank of England (BoE) rate cuts; “While we maintain our view of a quarterly pace to MPC rate cuts, further labour market weakness will increase the prospect of back-to-back rates cuts in August and September.”

The ECB will hold its annual conference in Portugal this week with rhetoric from Euro-Zone and Bank of England officials watched closely.

ING commented; “With markets currently pricing the first cut from the European Central Bank in December, we see risks tilted toward a dovish repricing from here.”

There has been further evidence of capital inflows into Europe.

German investment fund Deka CIO Christoph Witzke commented; "The U.S. is coming from a very capital market-friendly and stable environment. Now there is political intervention and also an attempt to expand power."

He added; "This creates uncertainty that some kind of intervention could come at any time.”

Given a current account surplus, Euro-area capital inflows would tend to strengthen the Euro.

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TAGS: Pound Euro Forecasts