British Pound to Euro Forecast: Sterling Supported as French Crisis Clouds Euro Outlook

Modified: Tuesday, 26 August 2025 21:15 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: Sterling Supported as French Crisis Clouds Euro Outlook

The Pound to Euro outlook (GBP/EUR) is increasingly shaped by French political turmoil, with markets wary that a September confidence vote could topple Prime Minister Bayrou’s minority government.

The Euro has come under renewed pressure as investors reassess long positions, while Pound Sterling has found support from a hawkish Bank of England backdrop.

Foreign exchange analysts at ING and Danske are warning that France’s instability could weigh further on the single currency.

GBP/EUR Forecasts: Break Above 1.1630?

The Pound to Euro exchange rate (GBP/EUR) briefly traded above the 1.1600 level on Tuesday before a retreat to near 1.1580.

The Euro was hurt by renewed French political concerns while the Pound was hampered by a dip in equities.

According to ING GBP/EUR will gain further support; “EUR/GBP looks to stay offered this week as French politics prompts some reassessment of long euro exposure. This comes at a time when a credibly hawkish Bank of England is already providing sterling with some support.”

The bank expects GBP/EUR will eventually break above 1.1630.

Saxo's John Hardy added; “Is French politics about to give the euro a nasty reality check?”

On Monday, French Prime Minister announced that he was calling a government confidence vote on September 8th in an attempt to gain support for budget cuts.

Bayrou, however, runs a minority administration with only 220 seats out of 577 seats in the assembly while both left and right-wing parties have stated that they will vote against the government.

MUFG commented; “The far-left France Unbowed party, the Green party and the far-right National Rally have all said they will vote to overturn the government while the Socialist party have said they won’t support a vote of confidence.”

The Prime Minister justified the decision; “yes it’s a risk, but the supreme risk is doing nothing there’s no getting out of this situation if we are not brave.”

If he loses the vote, there will again be the threat of a fresh General Election.

According to Danske Bank; “We think there is a significant likelihood of Bayrou not continuing as French PM as there continues to be a large opposition in the French parliament to support the necessary EUR 44bn in savings that he has proposed.”

ING commented; “French government bonds had already been underperforming in an otherwise benign environment for European government debt this summer. And we'll all be waiting for headlines today to see whether French 10-year yields start trading through Italy.

It added; “The broader question for the euro is whether recent French news destabilises appetite for the euro more broadly, or whether this is an isolated French issue.”

MUFG added; “The unfavourable domestic political developments could put a dampener on investor sentiment towards the euro in the near-term.”

AS far as economic data is concerned, the German IFO business confidence index edged higher to 89.0 for August from 88.6 previously and just above consensus forecasts.

There was a marginal decline in the current conditions assessment, but this was offset by an increase in the expectations component.

According to the IFO; “Sentiment among companies in Germany has brightened slightly. This increase was due to improved expectations among companies. However, the current situation was assessed as slightly worse. The German economy’s recovery remains weak.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts