Pound to Euro Forecast: GBP Below 1.16 as UK Economy Shrinks

July 11, 2025 - Written by David Woodsmith

STORY LINK Pound to Euro Forecast: GBP Below 1.16 as UK Economy Shrinks

The Pound to Euro exchange rate (GBP/EUR) pared recent gains to trade under 1.16 after the latest UK economic data released showed a second month of GDP decline.

UK economic output shrank again in May, slipping 0.1% on the month and surprising markets that had expected a small rebound.

The back-to-back monthly declines, following April’s 0.3% drop, have intensified fears that the country could be heading toward recession.

GBP/EUR consolidated just above the 1.1600 level on Thursday after again failing to regain the 1.1630 level. (0.86 for EUR/GBP).

Risk appetite has held firm in global markets which has supported the Pound, but European equities have also made gains and Sterling is still battling to overcome underlying fiscal concerns.

GBP/EUR needs to break above 1.1630 to bolster the overall outlook.

The FTSE 100 index posted a daily advance of over 1.0% to a fresh record high near the 9,000 level. The index has also gained 16% from April lows.


The Brazilian real slumped after Trump threatened to impose a 50% tariff on Brazilian exports to the US, but overall risk appetite has held firm.

Susannah Streeter, head of money and markets at Hargreaves Lansdown noted the positive global mood; “The President’s latest moves are seen as posturing, and there is high expectation that there will be plenty of negotiations to head off higher duties in the weeks ahead. Indications that the EU is edging closer to a deal with the US, with an agreement thought to be possible in a few days, has added to the positive vibes.”

She added; “So, hopes are riding high that the effects on global growth won’t be as onerous as feared.”

Swissquote Bank senior analyst Ipek Ozkardeskaya added; “Newswires remain hectic. It’s all tariffs, tension, and chaos — but markets have an extraordinary capacity to adapt. Trade developments are quickly becoming the new normal; they no longer hammer sentiment the way they once did.”

Nevertheless, he did warn that there are still dangers; “What could jolt markets is when all this starts showing up in the data — through slower growth or higher inflation. Until then, the music plays on.”

Domestically, the RICS housing index was unchanged at -7 for June compared with a small further decline to -9 for the month.

According to the RICS; "The earlier distortion caused by transactions being brought forward ahead of the Stamp Duty changes now appears to have largely dissipated, allowing underlying trends to re-emerge."


It added; “The June 2025 RICS UK Residential Survey results point to a steadier picture for sales market activity, with measures of buyer demand moving out of negative territory for the first time in several months. Furthermore, sentiment regarding the near-term outlook for sales volumes has turned marginally positive, albeit momentum is still expected to remain quite subdued over the months ahead.”

As well as trade developments, markets will be monitoring monetary policy developments.

ING commented; “In the absence of relevant eurozone data, we’ll keep monitoring ECB speeches. Yesterday, Holtzmann reaffirmed his ultra-hawkish stance by saying rates should not be lowered any further, while the more moderate Nagel didn’t rule anything out.

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TAGS: Pound Euro Forecasts