Pound to Euro FX Forecast: Sterling Slips Despite FTSE Record High

Modified: Friday, 1 August 2025 07:00 BST - Written by Frank Davies

STORY LINK Pound to Euro FX Forecast: Sterling Slips Despite FTSE Record High

The Pound to Euro exchange rate (GBP/EUR) hit 2-week highs just above 1.1620 before a significant retreat to near 1.1560.

Notably, GBP/EUR was blocked ahead of 1.1635 (equivalent to 0.86 for EUR/GBP)

There is scope for position adjustment on Thursday and SocGen warned that volatility usually increases during August.

The Pound and Euro were both on the defensive in global markets as the dollar made net gains following a relatively hawkish overnight press conference from Federal Reserve Chair Powell.

The UK currency was unable to derive support from stronger equity markets even though the FTSE 100 index posted a fresh record high amid robust risk appetite and hopes that major trade wars could be avoided.

Monex commented; "Although not in receipt of any tier-one data releases this week, sterling has still had a bumpy ride."

Monex considers that underlying fiscal concerns are a significant factor undermining the currency with forthcoming growth data watched closely.


As far as Euro-Zone data is concerned, German consumer prices increased 0.3% in July with the year-on-year inflation rate unchanged at 2.0%, but marginally above consensus forecasts of 1.9%.

The French rate held at 1.0% with the Italian rate static at 1.7%.

German unemployment increased 2,000 for July after a revised 10,000 increase for June and compared with consensus forecasts of 15,000 with the unemployment rate holding at 6.3%.

Scotiabank commented; “The EUR is outperforming most of the G10 currencies as we head into Thursday’s NA session.”

The bank noted diminishing expectations that the ECB will cut interest rates further.

ING, however, is less convinced that more hawkish market pricing is realistic; “Markets rushed to price out an ECB cut (only 15bp priced in by year-end) after last week’s central bank meeting, but low inflation paired with soft growth expectations can lead to a dovish rethink. Some comments by ECB members could accelerate that process, but August is generally a rather quiet period for ECB speeches.”

Markets will be looking ahead to Thursday’s Bank of England policy meeting. There are strong expectations that there will be a 25 basis-point cut to 4.00%.


According to SocGen; “We expect the MPC to cut Bank Rate by 25bp, taking it to 4%. Weak underlying growth, a loosening labour market, and pay growth undershooting the BoE’s forecast support a rate cut. Pushback against the market expectation of an August cut has also been non-existent.”

There are, however, also expectations of a split decision with the possibility that a few members will vote against a cut.

In contrast, some of the dovish members could vote for a larger rate cut with the scope for a jump in volatility following the decision.

The Bank of England will also release the latest Monetary Policy Report with updated growth and inflation forecasts.

UBS commented; “We expect Pill and Mann, who went against the majority at the May meeting and voted to keep Bank Rate unchanged, to favour keeping Bank Rate unchanged at this meeting as well.”

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TAGS: Pound Euro Forecasts