British Pound to Euro Forecast: BoE Outlook Change Hits Sterling

Modified: Friday, 8 August 2025 10:45 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: BoE Outlook Change Hits Sterling

The Pound to Euro (GBP/EUR) exchange rate jumped on Thursday following the Bank of England's (BoE) interest rate decision and settled close to 1.1540 on Friday, approaching one-week highs.

ING noted hawkish rhetoric; “Sterling is therefore in a stronger position, even though the adverse fiscal story and EUR’s strength may prevent a EUR/GBP correction from running much further.”

MUFG sees some scope for near-term Pound gains; “GBP momentum has been negative and short speculative positions have increased so the pound may be supported from some lightening of shorts.”

It added; “but ultimately we continue to expect EUR/GBP to regain upward momentum over the coming weeks and months.” (GBP/EUR losses)

The BoE decision met expectations, but the vote split and inflation commentary triggered significant doubts about whether the central bank would be in a position to cut rates much further.

In particular, markets are much less confident that the BoE will cut rates again in November.

ING noted both the vote split and the inflation rhetoric adding; “On top of that, the BoE subtly hinted that the end of the easing cycle is approaching by saying: “the restrictiveness of monetary policy has fallen as Bank Rate has been reduced”.


ING added; “Governor Andrew Bailey’s press conference wasn’t as hawkish, but given the significant upward revision in the inflation forecasts and downplayed jobs market concerns, the bear flattening of the yield curve and sterling’s rally are entirely justifiable.”

According to KPMG UK chief economist Yael Selfin; "The close vote split and the minutes of the meeting underscore the division on the MPC. The division reflects the two-sided risks to the inflation outlook and the uncertainty under which policymakers are operating.”

At this stage, Selfin expects one last rate cut at the November meeting.

There are still concerns over the UK fundamentals with weak growth and stubborn inflation.

MUFG commented; “The stagflationary tilt is hardly a positive for investor sentiment. A central bank that is curtailed from cutting rates due to sticky inflation is not reason to be bullish.”

The bank added; “There was also an “elephant in the room” so to speak in the worsening fiscal outlook that could force the government into huge tax increases that will clearly weigh on economic growth. That is currently all speculation and hence the BoE could not incorporate a weaker growth profile. But that factor will add considerably to negative sentiment for the pound.”

In this context, it added; “with our own view of the terminal rate unchanged and with weak growth outlook, the scope for the pound to advance on a sustained basis is low.”


As far as the Euro-Zone is concerned, markets will be watching Ukraine developments as the US attempts to broker ceasefire talks with diplomats attempting to formalise bilateral or trilateral talks between the US, Russia and Ukraine.

According to ANZ; “Geopolitics are in the spotlight and likely to be the major driver of FX markets heading into the weekend."

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TAGS: Pound Euro Forecasts