Pound to Euro Forecast 2025: Year-end GBP target of 1.15

July 20, 2025 - Written by Tim Boyer

STORY LINK Pound to Euro Forecast 2025: Year-end GBP target of 1.15

The Pound to Euro exchange rate (GBP/EUR) strengthened to 1.1580 on Thursday before a retreat to just below 1.1550 on Friday.

The immediate GBP/EUR prospects will improve if it can continue to hold the 1.1500 level.

Markets will monitor EU/US trade developments closely, but if there are no major developments, macroeconomic trends may dominate.

There is a strong consensus surrounding the near-term outlook for Bank of England interest rates, but with shifts in the longer-term expectations.

UBS has a year-end GBP/EUR target of 1.1500.

Lloyds Bank remains bearish on the UK fundamentals. It commented, higher inflation is almost a prerequisite to keep nominal GDP rising at a sufficient rate to cover nominal liabilities against those conditions. Covering such costs in real terms is a different thing altogether.

It added; This does not look a particularly auspicious backdrop for Sterling.


Next week, the UK will release the latest data on retail sales and government borrowing while the latest PMI business confidence data is also scheduled.

Markets have continued to digest the inflation and labour-market data released this week.

As far as the Bank of England is concerned, there are still very strong expectations that there will be a rate cut at the August meeting with base rate lowered to 4.00%.

Yael Selfin, Chief Economist at KPMG UK commented that; “slowing pay growth had “opened the door” for an interest rate cut in August”.

She added: “The impact of April’s tax and administrative changes has led to a marked slowdown in hiring activity among firms. Slowing activity in the labour market, coupled with pay pressures easing, will likely prompt the Bank of England to lower interest rates next month.

There has, however, been significant debate surrounding the outlook beyond August.

Deutsche Bank’s chief UK economist Sanjay Raja commented; “A ‘gradual and careful’ approach seems appropriate for now. And we do not think that the bar for faster rate cuts has been met just yet.”


Citifx and Goldman Sachs have both dropped their forecast for a further cut at the September meeting. Citi, however, expects that there will be cuts at every meeting between November and March 2026 which would take rates down to 3.00%.

The ECB will announce its latest interest rate decision on Thursday. There are strong market expectations that there will be no change in rates with the deposit rate held at 2.0%.

ING commented; “We had also expected a kind of ECB summer lull, secretly hoping to watch the July ECB press conference while relaxing with a summer cocktail in hand. Well, so much for wishful thinking. The reality looks different once again, and the ECB’s ‘good place’ has become somewhat less comfortable recently due to the new tariff threat for Europe and the continued strengthening of the euro.”

ING added; “A cut is highly unlikely given recent communication, but tariff risks and a strong euro could revitalise a dovish front that otherwise seemed settled on a neutral pivot.”

According to Danske Bank; “We expect Lagarde to reiterate the data dependent approach and leave the door open for September, without giving firm signals as data has been limited.”

UBS does expect yield differentials will be important; “We expect the EUR to be stronger than the pound over the forecast horizon on a spot basis, as the ECB nears the end of its easing cycle, while the Bank of England is expected keep easing gradually into 2026.”

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TAGS: Currency Predictions Pound Euro Forecasts