Pound-to-Euro Forecast: Sterling Stalls at 1.1540 as EUR Defies French Crisis

Modified: Wednesday, 10 September 2025 09:30 BST - Written by Tim Boyer

STORY LINK Pound-to-Euro Forecast: Sterling Stalls at 1.1540 as EUR Defies French Crisis

The Pound to Euro exchange rate (GBP/EUR) edged just above 1.1540 on Tuesday, with Sterling lacking momentum and the Euro holding firm despite a deepening French political crisis.

Currency exchange strategists warn that GBP/EUR must break 1.1630 to generate meaningful upside, while expectations of continued capital inflows into the Eurozone and looming Fed rate cuts are keeping the single currency supported.

GBP/EUR Forecasts: Break of 1.1630 Key

The Pound to Euro (GBP/EUR) exchange rate has secured only a limited gain to just above 1.1540 with the Euro broadly resilient despite a fresh French political crisis while there have been no major Sterling developments.

GBP/EUR will need to challenge and break 1.1630 to generate any significant momentum.

There are expectations that the Euro will continue to attract net capital inflows, especially with strong confidence that the Fed will cut interest rates next week.

MUFG commented; “While the political uncertainty is an unfavourable development, we continue to believe that it is unlikely to be sufficient on its own to trigger a weaker euro.”

Developments in the French market will, however, continue to be monitored closely with the risk that France slides into its own doom loop of weak growth and escalating deficits.

As expected, French Prime Minister Bayrou convincingly lost Monday’s confidence vote in the National Assembly.

A total of 364 MPs voted against the government, with only 194 in favour as not even all of Macron’s centrists backed Bayrou.

Bayrou will formally submit his resignation on Tuesday and President Macron will decide on the next move within the next few days.

He could accede to opposition demands and call new elections or look to appoint a new Prime Minister.

According to ING; “In our view, dissolution of parliament is not the most likely scenario in the coming days; the president will first try to find a prime minister who can survive a vote of no confidence.”

Macron could appoint a new Prime Minister from within his own party or look to nominate someone from the socialist Party in an attempt to find a consensus.

The overall market impact was limited, especially given strong expectations of a defeat.

The 2026 French budget deficit, however, is heading over 6% of GDP and any new Administration is likely to dilute proposed austerity measures.

Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, commented; "There is no upside scenario, there is no way out, there is no credible scenario where you end up with the same amount of fiscal consolidation."

ING notes the risk of weak economic activity causing further damage; “Political instability is likely to continue to weigh on France's economic outlook in the next quarters, and growth is expected to remain below the European average. This persistent weakness will continue to weigh on public finances.”

ING added; “French government bond (OAT) yields are unlikely to tighten from here, whilst the upside potential is still significant. The 10Y OAT-Bund spread is still some 10bp tighter than the peak last November when Barnier’s government fell. Compared to then we now have the possibility of new parliamentary elections, which only complicates the puzzle further and keeps uncertainty high.”

The ECB will announce its latest policy decision this week with the deposit rate expected to remain on hold at 2.00%.

According to Danske Bank; “market participants will be looking to the statement and press conference tone as well as the forecast update.”

As far as the Pound is concerned, there are no major data releases until the latest GDP update on Friday.

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TAGS: Pound Euro Forecasts