Pound-to-Euro Forecast: Short-Term GBP Gains but 2025 Weakness

Modified: Sunday, 17 August 2025 21:15 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: Short-Term GBP Gains but 2025 Weakness

The Pound to Euro (GBP/EUR) exchange rate briefly touched six-week highs near 1.1630 before slipping back under 1.16, supported by stronger-than-expected UK GDP data.

Sterling’s near-term outlook remains constructive, but foreign exchange analysts at HSBC warn that the currency could weaken into 2025 with a year-end target of 1.1365.

GBP/EUR: No Ukraine Breakthrough

HSBC forecasts that the Pound to Euro (GBP/EUR) exchange rate will retreat to 1.1365 at the end of 2025.

GBP/EUR briefly strengthened to 6-week highs near 1.1630 during the week before a retreat back below the 1.16 level.

There was no breakthrough on Ukraine in the talks between US President Trump and Russian President Putin with no announcement of a ceasefire or longer-term settlement.

Indicative markets suggest that GBP/EUR edged higher to 1.1600.


The latest UK GDP data was stronger than expected with 0.4% for June compared with consensus forecasts of 0.2% with second-quarter growth at 0.3%, above expectations of 0.1% and following 0.7% growth for the first quarter

ING commented; “At face value, the UK's 0.3% second-quarter growth performance looks reasonable amid a flurry of global and domestic headwinds. But this is largely concentrated in components not intrinsically linked to underlying economic performance, and the Bank of England will take these figures with a pinch of salt. We expect growth to slow in the second half.”

According to HSBC; “the GDP data suggest the UK economy, while not booming, is still trundling along and creating jobs. It raises questions about the BoE strategy for bringing down inflation. Until now it has attempted to bring down inflation while at the same time limiting the negative impact on the labour market. This strategy has so far proved unsuccessful.”

HSBC added; “A slower pace of rate cuts would support GBP in the near term. However, if the BoE is successful in bringing down inflation, it may entail a higher unemployment rate than it currently forecasts and a slower pace of growth. The Autumn Budget will bring new risks to the outlook, which we think could weigh on GBP. We prefer exposure to this versus the EUR.”

Credit Agricole maintains a more positive stance; “The absence of major shock in upcoming UK data could thus pave the way for the oversold GBP to recoup further ground, as the next big test for the UK outlook and the GBP may not loom until the Autumn Budget, and how much extra fiscal tightening will be needed for the UK Chancellor to balance the books.”

Berenberg also considers that there is reason for optimism on productivity and added; “If so, the government will not need to raise taxes by anywhere near as much this autumn as the most pessimistic analysts claim in the press.”

Geo-political developments will remain important as markets continue to monitor Ukraine developments.


ING commented; “The deterioration in the eurozone’s terms of trade has impacted the long-term euro fair value, and some conviction that energy prices could come structurally lower from here could make markets more comfortable with the euro trading at levels inconsistent with a relatively unattractive implied rate.”

The Euro has scope for net support if energy prices decline while on-going stalemate surrounding Ukraine would tend to limit Euro support.

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TAGS: Pound Euro Forecasts