Pound to Euro Forecast Shows Sterling Stuck Below 1.16 With No Breakout

Modified: Sunday, 24 August 2025 10:06 BST - Written by Frank Davies

STORY LINK Pound to Euro Forecast Shows Sterling Stuck Below 1.16 With No Breakout

The Pound to Euro (GBP/EUR) forecast has taken a bearish turn as Sterling once again failed to break 1.1600, leaving the currency stuck near 1.1565.

Hopes of a UK rebound have been dashed despite stronger data and record FTSE 100 highs, while the Euro has shown surprising resilience in the face of weak German GDP and deepening geopolitical risks.

Analysts warn the Pound Sterling forecast vs the Euro could slide further, with Danske Bank projecting GBP/EUR at just 1.1235 within the next 12 months.

GBP/EUR UPDATE

After again failing to hold above 1.1600 on Thursday, the Pound to Euro exchange rate (GBP/EUR) has been held in narrow ranges around 1.1565.

The Pound has not been able to capitalise on stronger-than-expected UK data or a fresh FTSE 100 index move to new record highs.

The Euro was also resilient against the Pound despite weaker-than-expected German data and no progress in securing any progress on the Ukraine situation.

Danske Bank forecasts that GBP/EUR will retreat to 1.1235 on a 12-month view.

Revised German GDP data recorded a 0.3% contraction for the second quarter compared with the flash reading of a 0.1% decline with year-on-year growth held at 0.2%.

ING commented; “Today’s GDP release shows the recent wave of optimism that had caught the German economy in the first months of the year is not yet showing in the data.

It added; “In fact, after the surge in economic activity resulting from the US front-loading of German exports in the first quarter, the economy experienced a reversal of the front-loading effect, and the first full-blown impact of US tariffs took effect.”

Importantly, however, markets have priced out the potential for further interest rate cuts by the ECB which is providing net Euro support.

As far as UK data is concerned, the GfK consumer confidence index improved to -17 for August from -19 the previous month and compared with consensus forecasts of no change. Four of the five main components improved on the month, but there was a small dip in confidence surrounding the general economic outlook for the next 12 months and this figure is still well below the level of August 2024.

GfK Consumer Insights Director Neil Bellamy commented; “The improved sentiment on personal finances is welcome, but there are many clouds on the horizon in the form of inflation – the highest since January 2024 – and rising unemployment. There’s no shortage of speculation, too, about what the autumn Budget will bring in terms of tax rises.

He added; “While August’s Overall Index Score of -17 is the best this year, consumer confidence continues to move in a very narrow band, and there’s no sense that it is about to break out into fresher, more optimistic territory.”

Danske Bank remains wary over the UK outlook and still negative on the Pound. According to the bank; “We increasingly see domestic factors and the relative growth outlook between the UK and the euro area as becoming GBP negatives.”

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TAGS: Pound Euro Forecasts