Pound-to-Euro Forecast: Break of 1.1480 Signals Deeper Losses

Modified: Sunday, 21 September 2025 17:30 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: Break of 1.1480 Signals Deeper Losses

The Pound to Euro exchange rate (GBP/EUR) fell to six-week lows on Friday, slipping under the 1.1480–1.1500 support zone as fiscal worries and souring consumer confidence compounded pressure on Sterling.

A jump in UK government borrowing, weak sentiment surveys, and the Bank of England’s decision to hold rates at 4.00% all reinforced concerns over the outlook, leaving GBP/EUR vulnerable to a retreat towards July’s 1.1415 lows.

GBP/EUR Forecasts: Dip to 6-Week Lows

The Pound Sterling extended its slide against the Euro on Friday, dropping below 1.1470. The decisive break raises the risk of deeper losses, with traders eyeing a potential move towards July’s 1.1415 lows if confidence does not recover quickly.

Danske Bank warned that the medium-term outlook remains tilted against Sterling, noting;
“We expect EUR/GBP to move higher towards 0.89 on a 6–12-month horizon on a weakening of the UK growth outlook and a positive correlation to a USD-negative environment.”

The latest government borrowing data reinforced fiscal fears ahead of the November budget while a further retreat in consumer confidence soured the underlying mood.

The UK government borrowing requirement jumped to £18.0bn for August from £14.5bn the previous year. This was the highest August deficit for five years and well above Office for Budget Responsibility (OBR) estimates for the month.

For the first five months of the year, borrowing increased to £83.8bn from £67.6bn the previous year. In its latest update, the OBR forecast that the 5-month deficit would be £72.4bn.

Capital Economics chief UK economist Paul Dales noted; “Of course, what matter’s is what the OBR forecasts the current budget to be in 2029/30, which is when the Chancellor’s fiscal mandate bites.”

He added; “Our current estimate is that it will forecast a deficit of about £18bn, meaning the Chancellor will have to raise £28bn, mostly through higher taxes, if she wants to keep her buffer against her rule of £10bn.”

The Bank of England (BoE) decision to hold interest rates at 4.00% had limited overall impact.

Rabobank now expects that the BoE will hold rates until the first quarter of 2026 due to stubborn inflation pressure. This would tend to increase the focus on fiscal policy.

It added; “Skipping the November meeting would reinforce commitment to the 2% inflation target and signal a need for firmer progress on inflation. It also shifts focus to Chancellor Reeves ahead of the Autumn Budget.”

Elsewhere, the data provided no significant Pound support. August retail sales volumes increased 0.5%, marginally above consensus forecasts.

The GfK consumer confidence index, however, retreated to -19 for September from -17 the previous month and slightly below expectations of -18 with all five main components retreating on the month.

Neil Bellamy, Consumer Insights Director at GfK, an NIQ Company, commented; “There’s an autumnal chill in the air this month.”

He added; “Looking at the economy, sentiment is sliding sharply: in June 2024 our forward-looking measure stood at -11, but just 15 months later it has slumped to -32. With tax rises expected in the November budget, the risk is that confidence inevitably falls, just like the autumn leaves.”

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TAGS: Pound Euro Forecasts