British Pound to Euro Forecast: Sterling Firm, Resistance at 1.1630 in Focus

Modified: Tuesday, 16 September 2025 08:00 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: Sterling Firm, Resistance at 1.1630 in Focus

The Pound to Euro (GBP/EUR) hovered near two-week highs at 1.1580 on Monday as markets braced for UK inflation data and the Bank of England decision.

Analysts at ING expect GBP/EUR to remain capped within 1.1500–1.1630, while MUFG sees scope for Pound support if the BoE signals a slower pace of quantitative tightening.

GBP/EUR Forecasts: Pivotal Week for the Pound

The Euro survived the French credit-rating downgrade while the Pound was underpinned by expectations of a hawkish Bank of England policy statement this week.

This week is extremely important for UK fundamentals. The UK inflation data and Bank of England rhetoric could change the narrative and potentially drive a GBP/EUR breakout.

The Pound to Euro (GBP/EUR) exchange rate traded just below 1.1580 and close to 2-week highs.

At this stage, ING expects a 1.1500-1.1630 to remain in place, but with a potential challenge on resistance.

After Friday’s market close, credit-rating agency Fitch downgraded the French rating to A+ from AA-, in line with market expectations.

Fitch pointed to the political stalemate and inability to tackle the budget deficit as the key concern.

It added; "This instability weakens the political system's capacity to deliver substantial fiscal consolidation."

ING commented; “Expect FX market players to keep one eye on French debt, even though our core view is that this is not going to broaden into another eurozone crisis.”

Domestically, there are major data releases and the Bank of England policy decision.

Consensus forecasts are for the annual increase in headline earnings to edge higher to 4.7% from 4.6% with the unemployment rate holding at 4.7%.

As far as inflation is concerned, the headline rate is expected to hold at 3.8% with the core rate edging lower to 3.7% from 3.8%.

ING expects inflation data will be crucial; “The divergence in UK inflation from that of the eurozone and the US is quite rare, and one can argue now that the UK price data is far more important than the activity data in determining when the BoE is prepared to deliver the next leg in its easing cycle.”

MUFG added; “Market participants will be watching closely to see the updated guidance from the BoE to assess the likelihood of the BoE continuing quarterly rate cuts in November.”

As well as the interest rate decision, the announcement on quantitative tightening (QT) could be pivotal for the Pound move.

Under QT, the BoE sells bonds into the market which tends to put upward pressure on yields, reinforcing fiscal concerns.

There are expectations that the bank will announce that bond sales will be scaled back from the current pace of around £100bn per annum

MUFG commented; “In so far as the announcement dampens upward pressure on longer-term gilt yields ahead of the Autumn Statement in late November, it should also help to ease downside risks for the GBP.”

The latest COT data, released by the CFTC, recorded a further small increase in short, non-commercial Pound positions to above 33,500 contracts from 33,100 the previous week and the largest short position since November 2022.

There is scope for a covering of short positions, especially if the data maintains expectations of a relatively hawkish Bank of England statement.

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TAGS: Pound Euro Forecasts