Pound-to-Euro Forecast: GBP Lacks Momentum, EUR Dominates FX

Published: Wednesday, 17 September 2025 09:00 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: GBP Lacks Momentum, EUR Dominates FX

The Pound to Euro (GBP/EUR) exchange rate held just above 1.1550 on Tuesday, unable to build further gains as the Euro outperformed across global markets.

ING analysts expect the 1.1500–1.1630 range to persist near term, with a 12-month forecast of 1.1240.

While UK jobs data confirmed a gradual cooling in the labour market, elevated wage growth means the Bank of England is still expected to hold rates at 4.00% this week.

GBP/EUR Forecasts: Euro Strength Caps Sterling Ahead of UK Inflation Data

The Euro continued to dominate FX trading, with investors pushing EUR/USD towards four-year highs above 1.1830. Against this backdrop, sterling’s gains against other currencies failed to translate into further advances versus the single currency. UK equities also slipped, limiting support for the pound, while gilt yields were little changed.

The latest UK labour market data showed a provisional 8,000 decline in payrolls for August, following a revised 6,000 drop the previous month. The unemployment rate held at a four-year high of 4.7%, while vacancies fell for a 38th consecutive period.

Liz McKeown, ONS director of economic statistics, commented;

“The labour market continues to cool, with the number of people on payroll falling again, while firms also told us there were fewer jobs in the latest period. Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards.”

Annual wage growth edged higher to 4.7% on the headline measure, with underlying growth easing to 4.8% from 5.0%. Analysts agreed the data reinforced the picture of a gradual, rather than abrupt, cooling.

ING noted;

“The UK jobs market is still cooling, though crucially, not materially faster than it was in the spring, following April’s big tax and minimum wage hike.”

MUFG added;

“The data appears to fit with the BoE’s view that labour market slack is increasing gradually rather than anything alarming.”

Markets expect the BoE to keep rates on hold at 4.00% this week. For now, inflation remains the bigger concern, with headline CPI expected to remain at 3.8% and the core rate slipping marginally to 3.7%.

Ashley Webb of Capital Economics said;

“Overall, with households’ inflation expectations at a six-year high in August, the stubbornness of wage growth will do little to ease the Bank’s concerns about the upside risks to inflation.”

MUFG added;

“Unless there is a significant downside surprise tomorrow, then the UK rate market is likely to hold on to current expectations that the BoE will leave rates on hold at the November MPC meeting.”

Some policymakers may still push for a cut, with analysts highlighting the likelihood of a split vote.

Jeremy Batstone-Carr, European strategist at Raymond James, commented;

“The vote is unlikely to be unanimous, perma-doves Swati Dhingra and Alan Taylor aren’t likely to be swayed, irrespective of the steady rise in consumer prices.”

With the euro strong and sterling range-bound, Wednesday’s inflation figures could be decisive in determining whether GBP/EUR attempts a breakout or slips back below 1.1500.

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TAGS: Pound Euro Forecasts