Pound-to-Euro Forecast: Retakes 1.15 Today on EUR Correction

Modified: Monday, 28 July 2025 14:08 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: Retakes 1.15 Today on EUR Correction

The Pound to Euro exchange rate recovered to retake the 1.15 as the single currency weakened across global markets and risk appetite improved, helping lift Pound Sterling from earlier lows.

Barclays sees scope for GBP/EUR to recover towards 1.1765.

Foreign exchange analysts at Danske Bank, however, expect that the Pound to Euro exchange rate (GBP/EUR) will slide to 1.1240 over the next six to twelve months.

During the week, Pound Sterling posted sustained losses and dipped to test 3-month lows just above 1.1440 amid Euro gains and negative Pound sentiment.

In the short term, EU-US trade developments ahead of the August 1st deadline could be pivotal in determining whether GBP/EUR breaks below 1.1440.

Any deal could lead to further near-term Euro demand.

Credit Agricole sees scope for a limited Pound recovery; “Barring any massive data surprise, the GBP could still try to reverse its slight near-term undervaluation, especially as the UK-US trade deal could shelter the GBP at a time when the 1 August deadline looms large for the EU.”


According to Barclays, the Pound is now undervalued; “we think conditions are in place for EURGBP to converge towards lower levels more consistent with rate differentials and the VIX (c.0.85). (1.1765 for GBP/EUR)

Danske, however, expects that the weak UK fundamentals will lead to further Pound losses.

The latest UK business confidence data was mixed with a slight improvement in manufacturing offset by weaker growth in services.

There was further upward pressure on costs and a key element was evidence of weak demand, together with persistent inflation pressure which increased fears of stagflation within the economy.

According to ING; “Higher payroll taxes and a chunky rise in the National Living Wage back in April are exerting more significant downward pressure on staffing numbers, according to the latest PMI.”

It added; “But the PMI also suggests these policy changes are keeping upward pressure on prices. We’ve seen hints of this in the CPI data, principally in food, where inflation rates have picked up over and above what we’ve seen in the eurozone.”

Danske Bank commented; “the pressure on GBP has mounted as the UK economy has showed more pronounced signs of weakness. We increasingly see domestic factors and the relative growth outlook between the UK and the euro area as becoming GBP negatives.”


It added; “Additionally, we think a global investment environment characterised by elevated uncertainty, widening credit spreads and a positive correlation to a USD negative environment, in our view, favours a weaker GBP.”

There are very strong expectations of an August Bank of England rate cut.

JP Morgan expects quarterly cuts, but added; “if the MPC is increasing its focus on slack, then there is still a risk that more members on the MPC could shift their support for a faster pace of cuts in 2H25.”

The ECB held interest rates at 2.00% and there were hints of no further cuts.

According to Rabobank; “It was also very unlikely that Lagarde would give any new guidance for September. She didn’t. But, reading between the lines, her slightly more upbeat comments hinted at lower odds that the ECB will cut again.”

Danske Bank commented; “Our forecast anticipates a final 25 basis point reduction to 1.75% at the September meeting, though the risks lean towards leaving the policy rate unchanged.”

ING noted the possibility that talk could move towards rate hike; “if the trade tensions are resolved quickly and a lifting of uncertainty increased resilience of the eurozone economy, the debate at the ECB could quickly shift. From whether or not more rate cuts are needed to when to hike rates in order to tackle inflationary pressures stemming from fiscal stimulus.”

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TAGS: Pound Euro Forecasts