British Pound to Euro Forecast: GBP Pushes Toward 1.16 as Euro Struggles

Modified: Wednesday, 27 August 2025 22:15 BST - Written by Ben Hughes

STORY LINK British Pound to Euro Forecast: GBP Pushes Toward 1.16 as Euro Struggles

The improving outlook has the Pound to Euro exchange rate (GBP/EUR) pushing toward 1.16, with Sterling gaining ground on French political turmoil and firm UK yield support.

Currency analysts say momentum is on the Pound’s side in the short term, though longer-term forecasts caution that GBP could falter once the Bank of England shifts to a more dovish stance.

GBP/EUR Forecasts: Attacks 1.16

The Euro has continued to struggle in global markets with the Pound to Euro exchange rate (GBP/EUR) advancing to near the 1.1600 level on Wednesday as yield spreads favour the Pound.

ING commented on the EUR/GBP outlook; “the balance of risks remains more tilted to the downside for the pair, with the hawkish repricing in Bank of England rate expectations still underpinning decent GBP short-term momentum.”

The bank still sees the potential for a GBP/EUR attack on 1.1630, but maintains longer-term expectations of Pound weakness as the Bank of England turns more dovish.

Markets remain wary over developments in France with widespread expectations that the government will lose a September 8th confidence vote.

ING commented; “Markets are still making up their minds about the aftermath of the upcoming confidence vote and don’t seem in a rush to price snap elections as the baseline scenario. The alternative – this or a new government watering down spending cuts enough to gather parliamentary support and deliver some fiscal consolidation – is plausible, though admittedly a relatively narrow path given the heightened scrutiny it faces.”

According to HSBC; “If the government collapses on 8 September, the most likely option for President Macron would be to dissolve the National Assembly and trigger another snap legislative election.”

It added; “Of course, another snap election could open the door to the emergence of a populist government, with negative consequences for France’s fiscal trajectory or increasing chances of clashes with the European Commission.”

Elsewhere, the German GfK consumer confidence index declined to -23.6 from -21.7 previously.

As far as the UK is concerned, Bank of England external committee member Mann maintained a hawkish stance in her recent comments.

According to Mann; “By squeezing out inflation today, you prevent it from persisting in the future,” she said. “If this policy is not followed, even tighter policy would be required later to remove the resulting higher inflation and rein in the expectations drift.”

She did add that she would vote for rate cuts if there was evidence of a slide in the economy. According to Mann; "However, I stand ready for a forceful policy action, in the form of larger, more rapid Bank Rate cuts, should the downside risks to domestic demand start materialising.”

HSBC still sees the risk of Pound under-performance; “In theory, higher unemployment should weaken wage bargaining power and slow inflation, but headline and core CPI remain stubbornly high. With the Bank rate in restrictive territory to tackle high inflation, despite weak growth, GBP has struggled to gain momentum, especially as the autumn budget carries further risks.”

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TAGS: Pound Euro Forecasts