Pound to Euro Forecast: Towards 1.1365 "Over Coming Quarters"

July 16, 2025 - Written by David Woodsmith

STORY LINK Pound to Euro Forecast: Towards 1.1365 "Over Coming Quarters"

British Pound Sterling rallies have continued to attract selling interest with the Pound to Euro exchange rate (GBP/EUR) sliding to fresh 3-month lows at 1.1500.

ING commented; “Our forecast preference had been for EUR/GBP to grind towards 0.88 over the coming quarters. (1.1365 for GBP/EUR)

It added; “That could come a lot sooner if the labour market weakens.”

Scotiabank commented; “The outlook for relative central bank policy is weighing on the pound as market participants consider dovish comments from BoE Gov. Bailey, with a specific focus on the labor market and the potential response to a greater than expected deterioration.”

It also noted an underlying market shift; “The options market reveals a continued erosion in sentiment as markets price greater premiums for protection against GBP weakness.”

In contrast, there was another positive German data release which helped support the Euro.

The Pound has been boosted by high yields, but if investors suddenly attempt to rush for the exit, the Pound could be subjected to significant selling.


As far as data is concerned, the British Retail Consortium (BRC) reported that like-for-like retail sales increased 2.7% in the year to June from 0.6% previously and above consensus forecasts of 1.2%.

BRC chief executive Helen Dickinson commented; “Retail sales heated up in June, with both food and non-food performing well.”

ING notes that there are significant underlying concerns surrounding the UK fiscal outlook, but the bank considers that monetary policy has been the key driver for recent losses.

The bank added; “the two-year EUR:GBP swap differential has narrowed back into 157bp as investors question whether the Bank of England will have to ease policy faster than once per quarter.”

In this context, the UK economic data will have an important impact over the next few days.

Inflation data will be released on Wednesday with consensus forecasts for the headline and core inflation rates to remain at 3.4% and 3.5% respectively.

On Thursday, the latest labour-market data is due. The number of people on payrolls will be a key area with markets also monitoring wages data.


Markets expect a slowdown in annual earnings growth to 5.0% from 5.3%.

The reaction to data will be driven to a significant extent by comments from Bank of England Governor Bailey later Tuesday at his Mansion House speech.

Bailey suggested over the weekend that there could be scope for a faster rate of interest rate cuts if there is evidence of notable labour-market deterioration.

If Bailey repeat these comments, there will potentially be a bigger reaction to weak labour-market data.

According to ING; “Should the May payroll release of -109k stay unrevised and should there be further payroll declines in June, UK rates and sterling could see another leg lower.”

The German ZEW economic sentiment index strengthened to 52.7 for July from 47.5 previously and above consensus forecasts of 50.8 and the strongest reading since February 2022.

There was also a stronger-than-expected improvement in the current conditions index to the highest level since June 2023. The data boost will provide net Euro support.

On Tuesday, the French government will announce measures to cut the 2026 budget deficit to 4.6% from 5.4%.

Danske Bank commented; “This is government's current target, but the budget for 2026 is likely to slip. This could lead to another vote-of-confidence of the French government.”

A no-confidence vote would hamper the Euro.

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TAGS: Pound Euro Forecasts