Pound to Euro Week Ahead Forecast: These Banks Split on GBP Outlook

Modified: Monday, 15 September 2025 10:45 BST - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: These Banks Split on GBP Outlook

The Pound to Euro exchange rate (GBP/EUR) traded near 1.1560 this week as banks issued sharply diverging forecasts.

UBS sees Sterling sliding to 1.14 by end-2026, while Credit Agricole targets gains towards 1.2050 next year.

The Bank of England is expected to hold rates at 4.00% on Thursday, leaving focus on the UK budget outlook and the ECB’s cautious stance.

GBP/EUR Forecasts: Banks Split on Sterling Outlook

UBS forecasts that the Pound to Euro (GBP/EUR) exchange rate will retreat to 1.14 by the end of 2026.

In contrast, Credit Agricole expects gains to 1.2050 at the end of next year.

GBP/EUR secured a tentative net gain to 1.1560 during the week amid gains in equity markets.

As far as the UK is concerned, there are very strong expectations that the Bank of England will leave interest rates at 4.00% at this week’s policy meeting.

ING commented; “September’s meeting almost certainly won’t result in another rate cut, with policymakers instead poised to keep rates at 4% on 18 September. But the prospect of a November cut hangs in the balance, and this meeting will be heavily scrutinised for hints on whether officials are still considering further easing this year.”

Investment banks remain wary over the UK budget outlook.

J Safra Sarasin commented; “In the UK, the possibility of a ‘debt doom loop’ remains a concern. The Labour government has fallen short of its fiscal goals, hence tax increases look inevitable. This is set to weigh on growth, which already suffers from historically high consumer savings rates and depressed business investment.”

It added; “Hence the risk remains that the BoE will need to cut more than markets currently expect, which should push the pound lower in the medium term.”

HSBC notes the potential risk profile; “After the calamitous Mini Budget in September 2022 and considerable GBP fall, Chancellor Reeves will know the consequences if she missteps on 26 November. With little space to manoeuvre, political uncertainty fattens GBP’s tail risks.”

Credit Agricole is more positive on the Pound outlook; “we remain of the view that many negatives are already incorporated into the price of the GBP especially given that we doubt the market concerns about the UK fiscal outlook would grow into fears about the UK’s sovereign creditworthiness.”

Markets continue to monitor developments in France with President Macron nominating a new Prime Minister after Bayrou lost the confidence vote. There is still no evidence of any consensus on the budget.

Berenberg commented; “A genuine financial crisis with a self-reinforcing doom loop (higher yields = bigger deficits = even higher yields ...) remains quite unlikely for the time being. With its almost balanced current account, France is no obvious candidate for a financial crisis. Of course, we cannot rule it out completely.

It added; “If the French Socialists, who hold the balance of power in a deeply divided parliament, continue to reject common sense and insist on unfinanceable demands, the risk could rise.”

The ECB held interest rates at 2.00% at the latest policy meeting, in line with strong consensus forecasts.

There were slight adjustments to growth and inflation forecasts. Bank President Lagarde stated that the risks to the economic growth were now more balanced while the process of disinflation has ended.

Following the relatively hawkish comments, markets were even more doubtful that the ECB would cut rates again which helped underpin the Euro.

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TAGS: Pound Euro Forecasts