British Pound to Euro Forecast: Sterling Flat, Euro Outlook Dominated by French Politics

Modified: Tuesday, 9 September 2025 07:45 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: Sterling Flat, Euro Outlook Dominated by French Politics

Pound Sterling is struggling against the Euro at he star of the new week, trading around 1.1520 as political and fiscal headwinds dominate. The Pound to Euro (GBP/EUR) exchange rate remains close to 1.1500 support, with ING forecasting a tight 1.1500–1.1560 range this week and warning UK bonds are a weak link.

Foreign currency experts at Rabobank expect French political turmoil to limit fiscal tightening, while Danske Bank sees ongoing uncertainty in Paris capping Euro gains. COT data also shows speculative bets against Sterling at their highest since late 2022, underscoring negative sentiment.

GBP/EUR Forecasts: Held Near 1.1500?

The Pound to Euro (GBP/EUR) exchange rate has not been able to take advantage of political turmoil in France while the UK government reshuffle has not had any positive impact. GBP/EUR is trading around 1.1520, close to the 1.1500 support area.

ING considers the UK bond market is a potential weak link for the Pound, but expects limited developments this week. There are no major UK data releases until the GDP data on Friday with the 30-year bond yield holding close to 5.50%.

It expects a relatively narrow range this week; “We suspect EUR/GBP can trade in a 0.8650-0.8700 range this week, given that next week's BoE meeting and news on quantitative tightening plans will be far more interesting.” (1.1500-1.1560 for GBP/EUR).

The French National Assembly will hold a confidence vote later in the day with widespread expectations that the government under Prime Minister Bayrou will be defeated.

Danske Bank commented; “We expect political uncertainty in France to persist and view significant near-term improvements in public finances as unlikely.”

Assuming the government loses, President Macron could call fresh elections or appoint a new Prime Minister.

There has been some talk that Macron will look to form a coalition of centrists with the socialists.

Rabobank commented; “We believe that the most likely course is that Macron will appoint a new Prime Minister and plans for fiscal retrenchment will be necessarily curtailed by the unfriendly operating environment.”

Rabobank also noted relentless pressures; “This year, the budget deficit will improve a bit, to around 5.5%. But without fiscal tightening, the deficit is set to worsen in 2026. If the government does not act, several fiscal measures will roll over to next year. Add to that the rising interest expenditure and a weak economic outlook that may also limit the government’s revenues.”

The bank sees limited scope for further market stresses; “The recent widening of French spreads over Germany already accounts for a lot of the bad news. We believe the current trading range reflects many of the fiscal concerns already.”

As far as Euro-Zone data is concerned, the Sentix investor confidence index dipped to -9.2 for September from -3.7 in August and below expectations of -2.2.

Sentix commented; “The new September data from the sentix economic index dashes hopes of an economic recovery. Both the current situation and future expectations are deteriorating noticeably. This means that economic concerns are returning in full force.”

The latest COT data, released by the CFTC, recorded a net increase in short, non-commercial Pound positions to over 33,000 in the latest week from 31,500 the previous week and close to the highest level since late 2022 which indicates negative underlying Pound sentiment.

There may, however, be limited scope for further Pound selling unless there is a fresh jump in UK bond yields.

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TAGS: Pound Euro Forecasts