Pound-to-Euro Forecast: GBP "Should be Trading Above 1.1765"

Modified: Thursday, 31 July 2025 11:50 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: GBP "Should be Trading Above 1.1765"

The Pound to Euro exchange rate (GBP/EUR) is trading at around 1.15637 on Thursday, as Sterling underperforms against the majors, including the US Dollar.

Credit Agricole, however, sees scope for a further GBP/EUR rebound and added; “Looking at yield spreads, the bank considers that GBP/EUR should be trading above 1.1765.”

Scotiabank noted the potential for further position adjustment; “Extended bullish positioning has also left the EUR vulnerable to adjustment, as shown in the most recent CFTC report that saw the sizeable $18.4bn EUR long hold steady at the upper end of its historical range.”

There are still reservations over Pound fundamentals which will tend to curb the scope for further buying.

Markets remain very confident that the Bank of England (BoE) will cut interest rates by 25 basis points to 4.00% next week.

The BoE data on Tuesday recorded a stronger pace of consumer lending for June. RSM UK chief economist Thomas Pugh commented; "Overall, money and credit data give a tentative sign of consumer spending picking up a little, and of business sentiment improving, however, growth will still be weak in Q2.”

He added; “For now, the MPC is likely to focus on that weaker growth outlook, meaning a rate cut in August is the odds-on bet."


Credit Agricole notes that several price increases have already been priced in and commented; “We therefore believe that many BoE-related negatives are in the price of the GBP and do not expect the currency to extend its recent downtrend.”

It added; “The conclusion is consistent with our recent FX positioning data that suggests that the GBP is starting to look oversold and the results from our short-term fair value model that signalled that EUR/GBP is looking expensive at current levels.”

As far as Euro-Zone data is concerned, German GDP recorded a 0.1% contraction for the second quarter of 2025 after 0.4% growth previously which was in line with consensus forecasts. Year-on-year growth of 0.4% was above expectations of 0.2%.

ING commented; “All in all, despite the recent optimism, today's GDP data is a painful reminder that optimism alone does not automatically bring back strong growth. The economy's flirtation with yet another year of stagnation continues.”

Italy also recorded 0.1% GDP contraction for the second quarter.

The Euro-Zone recorded 0.1% GDP growth for the second quarter, marginally above consensus forecasts of no change with year-on-year growth of 1.4%.

Elsewhere, the headline Spanish inflation rate increased to 2.7% for July from 2.3% previously and above consensus forecasts of 2.3%.


The Euro-Zone business and consumer survey recorded an increase to a 5-month high of 95.8 for July from 94.2 in June and above expectations of 94.5.

The Euro-Zone inflation data is due on Friday with expectations that the headline rate will edge lower to 1.9% from 2.0% in June.

Higher inflation would tend to discourage further interest rate cuts and offer some Euro support.

Trade developments will continue to be monitored closely and could still spark increased volatility.

MUFG noted that there are still a lot of unanswered questions surrounding the US-EU trade deal as it is still a political declaration rather than an economic agreement at this stage. This could lead to renewed volatility in global markets.

According to the bank; “So, it’s clear from this deal and the lack of detail in parts of the US-Japan deal that ongoing negotiations are likely which may well include renewed threats in the future over tariff rates.”

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TAGS: Pound Euro Forecasts