British Pound to Euro Forecast: Sterling Pushes 1.16, Euro Outlook Darkens

Modified: Thursday, 28 August 2025 22:15 BST - Written by Ben Hughes

STORY LINK British Pound to Euro Forecast: Sterling Pushes 1.16, Euro Outlook Darkens

The Pound forecast remains finely balanced this week, with the Pound to Euro exchange rate (GBP/EUR) testing key resistance near 1.16.

Sterling is underpinned by higher UK yields, while the Euro is being dragged lower by French political turmoil and persistent concerns over the Eurozone economy.

GBP/EUR Forecasts: Continues to Attack Resistance Area

The Pound to Euro exchange rate (GBP/EUR) has continued to edge higher but has not been able to hold above the 1.16 level, trading just below this level on Thursday.

Key resistance for the pair remains in the 1.1620-30 band, with a break higher having potentially important consequences.

The Euro is being hampered by unease surrounding the French political situation, while the economic developments have been mixed with some positive signs.

UK yield trends remain positive, but equities have retreated, and concerns about stagflation risks persist.

French political developments will continue to be closely watched, with Prime Minister Bayrou set to meet with opposition leaders.

According to MUFG, “It seems highly likely that PM Bayrou will lose the parliamentary confidence vote on 8th September, with opposition parties already indicating a plan to vote against. President Macron will then likely look to repeat the same again by choosing another candidate for PM and trying once again.”

It added; “What is clear from this is that France is in policy gridlock and the prospects of any meaningful fiscal consolidation ahead of the presidential election in 2027 are slim.”

MUFG played down the risk of further French bond selling, but added; “there are some upcoming sovereign rating reviews that could result in downgrades. Fitch Ratings is scheduled to provide its updated review on 12th September.”

Looking at the Euro-Zone economy, ECB President Lagarde was broadly optimistic over the outlook with comments that consumers and businesses were resilient.

ING noted; “Those comments are a reminder that European unemployment is low and that the consumer savings ratio is relatively high”

This combination should support consumer spending.

Eurozone loans to households increased by 2.4% in July, marking the largest rise since April 2023. Credit to companies increased by 2.8% the fastest pace since June 2023.

The latest business and consumer survey, however, edged lower to 95.2 for August from 95.7 previously.

As far as UK data is concerned, the CBI retail sales survey was little changed at -32 for August from -34 the previous month. Retailers expect a slower rate of decline for September with a reading of -16.

Price pressures remain elevated, with selling prices rising at their fastest rate since November 2023.

CBI Principal Economist Martin Sartorius commented; “Retailers endured another tough month in August, with annual sales volumes falling for the eleventh consecutive month. This downbeat outlook is reflected in firms’ plans to scale back investment and hiring.”

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TAGS: Pound Euro Forecasts