Pound Sterling to Euro Forecast: GBP Vulnerable to Russia Tensions Despite EUR Weakness

Modified: Thursday, 25 September 2025 09:00 BST - Written by David Woodsmith

STORY LINK Pound Sterling to Euro Forecast: GBP Vulnerable to Russia Tensions Despite EUR Weakness

The British Pound stayed pinned near two-month lows against the Euro at 1.1440, with the Pound to Euro exchange rate (GBP/EUR) weighed by weak UK data, geopolitical jitters and fragile risk sentiment.

Analysts warn Sterling could suffer more than the euro if Russia tensions escalate, while fresh German IFO weakness underlines Europe’s sluggish growth backdrop.

Danske Bank still sees the pair sliding towards 1.1240 on a 12-month view.

GBP/EUR Forecasts: Near 2-Month Lows

The Pound to Euro (GBP/EUR) exchange rate has remained on the defensive and trading just above 1.1440, close to 2-month lows recorded on Tuesday.

The Pound found it very difficult to make headway in global markets even with tailwinds for global equity markets which suggests underlying vulnerability while the Euro has drifted lower.

The FTSE 100 index posted significant losses on Wednesday following a dip on Wall Street and the Pound tends to be sensitive to risk conditions.

If geo-political tensions with Russia intensify, the Euro and Pound would both be at risk, although Sterling would potentially be hit harder.

A drop below the July low near 1.1420 would risk further losses.

Danske Bank expects gradual GBP/EUR losses to 1.1240 on a 12-month view, but added; “The key risk to seeing EUR/GBP trade substantially higher than our forecast is a sharp sell-off in global risk and/or renewed focus on the UK’s fragile fiscal position.”

In rhetoric on Tuesday, President Trump shifted his position on Ukraine and suggested that it could regain all the territory that has been lost. He also called for a more aggressive NATO stance against Russia which could increase tensions within Europe.

ING commented; “If anything, there are downside risks for the euro and even more for higher-beta European currencies as Trump told EU allies to shoot down Russian planes violating NATO airspace.”

Rabobank noted the stronger tone in the latest NATO statements.

It added; “So while can only speculate about the next steps taken by NATO or Europe, opinions appear to be shifting and there can be little doubt that whatever comes next is going to be even more costly for Europe in many respects.”

The German IFO business confidence index dipped to 87.7 for September from a revised 88.9 previously and below consensus forecasts of 89.3.

The current assessment and expectations components both declined on the week.

According to the IFO; “Companies were less satisfied with current business, while their expectations clouded noticeably. Prospects for an economic recovery have suffered a setback.”

The German PMI services-sector index strengthened according to the latest PMI data, but the IFO commented on the sector; “Expectations have grown markedly more pessimistic, and the indicator fell to its lowest level since February.”

Rabobank noted that PMI business confidence data on Tuesday reported a decline in export orders which will be a headwind for the economy.

It added; “In summary, European growth will probably remain sluggish in the coming quarters.”

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TAGS: Pound Euro Forecasts