Pound to Euro Forecast: "Less Dovish ECB" Could Bring 1.1365 Target Sooner

July 27, 2025 - Written by Frank Davies

STORY LINK Pound to Euro Forecast: "Less Dovish ECB" Could Bring 1.1365 Target Sooner

There was a bounce in UK retail sales for June, but it failed to support the Pound Sterling against the Euro amid evidence of underlying vulnerability and consumer angst.

The Euro exchange rates also made net gains on increased speculation that the ECB will resist further interest rate cuts.

The Pound to Euro (GBP/EUR) exchange rate has posted further losses to near 1.1460 and close to 3-month lows.

A dip below the April low at 1.1440 would risk further selling and potentially bring November 2023 lows near 1.1400 in focus.

ING commented; “We had been looking for EUR/GBP to edge towards 0.88 next year (1.1365 for GBP/EUR), but a less dovish ECB could bring that target closer.”

MUFG added that the ECB policy update; “has left the door open for the EUR to strengthen further against the GBP.”

UK retail sales volumes declined 0.9% for June compared with consensus forecasts of a 1.2% increase and followed a revised 2.8% decline the previous month.


Sales increased 0.2% for the second quarter of the year compared with the first quarter.

Food sales rebounded 0.7% for the month after a 5.4% slide previously while fuel sales increased 2.8%, the strongest increase since May 2024.

The GfK consumer confidence index edged lower to -19 on the month from -18 previously and in line with expectations.

Interestingly, the savings index increased to the highest level since 2007.

According to GfK’s consumer insights director Neil Bellamy; “The data suggests that some people may be sensing stormy conditions ahead. An already dark mood over the economic situation ahead worsened further this month against a backdrop of global uncertainty and continued trade disputes, as well as domestic economic challenges.”

He added; “Speculation [is also] growing over possible tax rises in the Autumn Budget. It’s difficult to see what will lift [sentiment] meaningfully higher in the months to come. It has drifted quietly downwards over the past year, and any fresh challenges or shocks could easily push confidence sharply lower.”

ING commented on the overall outlook; “April's hike in UK payroll taxes and the National Living Wage are squeezing hiring but keeping pressure on inflation. We think the former is a bigger concern than the latter, but for now the bar for faster Bank of England rate cuts appears high. We expect cuts in August and November.”


The German IFO business confidence index increased to a 14-month high of 88.6 for July from 88.4 previously, although this was slightly below market expectations.

The ECB left interest rates on hold at Thursday’s meeting with the deposit rate at 2.0% and in line with strong consensus forecasts.

There were hints following the meeting that the most likely outcome was no change in September.

Rabobank commented; “The ECB left its policy on hold, as widely expected. And, despite the prevailing uncertainty, the ECB’s economic assessment actually sounded slightly more optimistic. Lagarde seemed to express marginally more confidence in the central bank’s medium-term outlook. So don’t call today’s decision a pause; it may very well mark the end of the cutting cycle.”

Nordea added; “Weak incoming data and negative trade news could still tilt the scale towards another rate cut, but in the absence of such news, further cuts look rather unlikely. We expect the ECB to remain on hold for the remainder of this year and all of next year.”

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TAGS: Currency Predictions Pound Euro Forecasts