Pound to Euro Forecast: Strong Selling Interest on Gains to 1.1630

July 8, 2025 - Written by David Woodsmith

STORY LINK Pound to Euro Forecast: Strong Selling Interest on Gains to 1.1630

The Pound-to-Euro exchange rate (GBP/EUR) was unable to hold above 1.1600 last week and drifted lower to near 1.1580 on Monday with further reservations over the UK outlook and no support from global risk conditions amid unease ahead of the US Administration’s tariff announcements.

Over the weekend, there were repost that the government might have to raise £20bn in the Autumn to avoid breaking their fiscal rules.

ING expects GBP/EUR to hit strong selling interest on gains to 1.1630.

From a medium-term view, MUFG expects GBP/EUR will slide to 1.1300 on fiscal concerns and Bank of England rate cuts.

Looking at the fiscal outlook, BNP expects further tax increases are likely given that other options are unattractive. It notes; “After all, delivering on spending cuts looks politically challenging (particularly when other spending needs, e.g. on defence, are rising), while abandoning the fiscal rules and financing spending through higher borrowing could intensify market concern.”

Credit Agricole expects more is needed to stabilise the situation; “we think that for the GBP to consolidate once again, market participants would also demand more clarity on the future of Chancellor Reeves. In the absence of that, memories of the traumatic gilt market and GBP selloff from September 2022 could continue to haunt the beleaguered GBP.”

ING added; “The fall-out from last week's U-turn on welfare reform is a broader understanding that taxes are going to have to go up in November. The weaker sterling story then switches from a sovereign risk premium story to a more conventional one of tighter fiscal and looser monetary policy.”


MUFG commented on monetary policy; “More evidence of a weaker labour market would encourage a further dovish policy shift on the MPC increasing expectations for a faster pace of BoE cuts later this year. As a result, we favour further GBP downside against the EUR even though the higher yields on offer in the UK and lower financial market volatility remain supportive of the GBP.”

BNP added on the Pound; “We think the risks remain skewed towards further weakness before more clarity guides the market towards a more sustainable path.”

Halifax reported that UK house prices were unchanged in June after a 0.3% decline previously with the year-on-year increase edging lower to 2.5% from 2.6%.

Halifax Head of Mortgages Amanda Bryden commented; “with markets pricing in two more rate cuts from the Bank of England by year end, and the average rate on newly drawn mortgages now at its lowest since 2023, we continue to expect modest house price growth in the second half of the year.”

German industrial production increased 1.2% for May compared with consensus forecasts of a 0.6% decline, although the April figure was revised slightly to -1.6% from -1.4%.

ING commented; “Industrial data from May suggests that there is more to German industry than just US front-loading. It's too early to give the all-clear, but signs of at least a cyclical rebound, albeit from low levels, are increasing.”

The Sentix investor confidence index strengthened to 4.5 for July from 0.2% previously which was above consensus forecasts of 1.1 and the strongest reading since February 2022.


According to Sentix; “All subcomponents increased for the third time in a row. Current assessment scores in particular are now rising. A similarly positive trend can be seen for Germany.”

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TAGS: Pound Euro Forecasts