Pound to Euro Forecast: UK Bond Market to Trigger GBP Breakout

Modified: Tuesday, 19 August 2025 22:26 BST - Written by Ben Hughes

STORY LINK Pound to Euro Forecast: UK Bond Market to Trigger GBP Breakout

The Pound to Euro exchange rate (GBP/EUR) has again been unable to hold the 1.1600 level and is trading near 1.1580 on Tuesday.

The UK bond market will be a key focus with the latest inflation data on Wednesday. A crucial element will be whether higher yields support or undermine the Pound.

ING expects stronger than expected inflation data and added, “We see upside risks for the pound ahead of tomorrow’s release and a break below 0.860 as increasingly possible. (GBP/EUR move above 1.1630)

The 10-year bond yield has increased to 3-month highs near 4.75% while the 30-year inflation-linked yield increased to the highest level since 1998, surpassing the level seen under Truss in 2022.

Higher bond yields will offer some near-term Pound support, but there will also be unease over the impact on debt-servicing costs, which will risk intensifying underlying fiscal concerns and eventually hurt the Pound.

MUFG commented, “The hawkish repricing has also helped to lift yields at the long end of the curve, resulting the 30-year gilt yield rising to within touching distance of the cycle high from back in April at 5.66% which if broken may trigger some renewed concerns over the UK public finances heading into the autumn Budget.”

The Euro and Pound have both struggled to gain any traction in global markets, with a major focus on geo-political developments and talks on Ukraine in Washington.


The US has indicated that it might be amenable to providing security guarantees for Ukraine if there is a deal with Russia on territory. There were, however, no details and major doubts about whether the US would provide actual support.

ING commented, “Yesterday’s summit in Washington resulted in a clearer roadmap for peace talks and some openness about security guarantees from the US. But the euro was offered as news flowed, perhaps on the view that the bulk of key territorial negotiations are still ahead of us.”

There will be attempts to set up a meeting among Trump, Putin, and Zelensky, with markets closely monitoring gas prices.

Domestically, the latest UK inflation data is due on Wednesday. Ahead of the data, markets are now pricing in less than a 30% chance of a November cut.

The headline inflation rate is forecast to edge higher to 3.7% from 3.6% previously, with the core rate holding at 3.7%.

Markets will be even less convinced of a November rate cut if there are higher-than-expected rates.

The data for the services sector will be of particular interest following the reading of 4.7% for June.


ING commented, “We expect both headline and services inflation to accelerate, to 3.7% and 4.8%, respectively.”

Weaker-than-expected data would provide some relief for the gilt market.

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TAGS: Pound Euro Forecasts