Pound to Euro FX Forecast: GBP JUMPS 1.25% in "Huge Move" Higher

Modified: Tuesday, 29 July 2025 08:39 BST - Written by David Woodsmith

STORY LINK Pound to Euro FX Forecast: GBP JUMPS 1.25% in "Huge Move" Higher

The Pound to Euro exchange rate (GBP/EUR) has extended its substantial rally seen on Monday, to trade at 1.1548 at the time of updating.

Pound Sterling rallied from the weekly open of 1.1412 to test highs of 1.1555 on Tuesday representing a 1.25 percent gain so far this week.

According to FX analysts at ING Bank, "We saw a huge move lower in EUR/GBP yesterday. Ex post, it could be seen as the UK having a better deal than the EU when it comes to trade.

"In reality, however, it was probably all to do with positioning, where opposing fiscal and monetary prospects between the eurozone and the UK had made long EUR/GBP one of the conviction trades this summer."

The Pound-to-Euro rate had slumped to 20-month lows close to 1.1420 after Monday’s Asian open before rallying to 1.1490 as the Euro lost ground in global markets and equities made net gains.

The Euro overall lost ground amid a correction from strong gains last week as the Euro-Zone economy will still take a hit.

There are still significant reservations surrounding the UK economy.


According to ING there is the potential for strong GBP/EUR support on any dips to 1.1365. It added, “Sitting long EUR/GBP in quiet August markets is again carrying negative, and a very light UK calendar this week looks unlikely to provide the incentives to add to short sterling positions. Perhaps EUR/GBP can trade something like a 0.8700-0.8770 range this week.” (1.1400 - 1.1495 for GBP/EUR)

Risk appetite strengthened on Monday in response to the US-EU framework trade deal. The deal removed the immediate threat of 30% tariffs from August 1st and lessened the risk of a trade war between the two sides.

European equities hit a 4-month high in early trading while the FTSE 100 index posted a fresh record high.

The Pound tends to gain net support when global risk appetite strengthens.

National Australia Bank senior currency strategist Rodrigo Catril commented; "It could be a positive week, just purely from the fact that now we know the rules of the game, if you like."

He added; "Now that there is more clarity, you would think that not only in the United States, but around the globe, there will be a little bit more willingness to look at investment, to look at expansions, and to look at where the opportunities are."

According to Rabobank; “At the very least, the European Union will now not be hit by a 30% levy when the US reinstates its “reciprocal” tariffs. So, the deal should at least remove some of the uncertainty that plagued investors’ and corporates’ decision making.”


If traders are looking to engage in carry trades, high UK yields will offer net support.

The US trade stance with China will also be important with Beijing facing an August 12 deadline for a durable trade pact with the United States.

According to comments overnight, the two are expected to extend their tariff truce by three more months which would help underpin risk conditions.

The Federal Reserve will announce its latest policy decision on Wednesday with strong expectations that rates will be held at 4.50% before cutting rates later in the year.

MUFG commented; “The Fed would have to deliver a hawkish policy surprise in the week ahead to disrupt FX carry trades by dropping plans for rate cuts which appears unlikely at the current juncture.”

The UK CBI retail trade survey improved slightly to -34 for July from -46 previously, but below consensus forecasts of -28 and the 10th successive decline.

Companies expect a further significant decline August as underlying pressures continue.

CBI principal economist Martin Sartorius commented; "Firms reported that elevated price pressures – driven by rising labour costs – and economic uncertainty continue to weigh on household demand, which has contributed to sales volumes falling since October 2024."

Mortgage lending data is due on Tuesday, but the overall UK economic calendar is light this week and parliament is in recess which will limit political chatter.

Labour disputes in the health sector will be scrutinised given concerns over underlying upward pressure on salaries which will further complicate fiscal policy.

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TAGS: Pound Euro Forecasts