Pound-to-Euro Forecast: ECB Expected Hold, Limiting EUR Selling

Modified: Friday, 26 September 2025 10:30 BST - Written by Frank Davies

STORY LINK Pound-to-Euro Forecast: ECB Expected Hold, Limiting EUR Selling

The British Pound remained pinned near two-month lows against the Euro on Thursday, with GBP/EUR trading just under 1.1450 as UK bond-market stress and weak retail sales kept Sterling under pressure.

A fragile gilt auction underscored investor unease ahead of November’s budget, while Danske Bank still targets 1.1240 on a 12-month view.

GBP/EUR Forecasts: Trapped Near 2-Month Low

The Pound to Euro (GBP/EUR) exchange rate has been unable to gain significant support and is trading just below 1.1450, still close to 2-month lows.

A dip below 1.1420 would risk further Pound selling.

Danske Bank maintains a 12-month target of 1.1240.

The Pound and Euro have both been hampered by evidence of weak consumer spending, but the Euro has secured some relative protection due to hopes for stronger German demand next year amid a fiscal boost.

In contrast, there are expectations of UK tax hikes in the November budget while bond-market sentiment remains fragile.

There was weaker demand at the latest 10-year gilt auction with the 10-year yield increasing to 4.73% from 4.68%. Lale Akoner, global market analyst at eToro commented; "The drop in gilt demand highlights investor impatience with uncertainty and could keep markets volatile until the budget."

The UK CBI retail sales survey improved slightly to -29 for September from -32 previously and compared with consensus forecasts of -31.

This was, however, the 12th successive negative monthly figure and retailers expect a faster rate of decline for October.

CBI Principal Economist Martin Sartorius commented; “September marked the twelfth straight month of falling retail sales, underlining the tough conditions facing the sector.”

He added; “Weak demand continues to weigh on sales, while US tariffs are adding pressure for some retailers.”

As far as the Euro-Zone is concerned, the German GfK consumer confidence index improved slightly to -22.3 from -23.5 the previous month.

Rolf Bürkl, Head of Consumer Climate at NIM commented; “After falling for three months in a row, the Consumer Climate has now ended its downward trend – at least for the moment.”

He added; “Whether this marks the beginning of a sustained turnaround is more than uncertain. The geopolitical situation, concerns about jobs, and renewed fears of inflation are likely hinder a thorough recovery at the moment."

The Euro was hurt by weaker than expected IFO business confidence data on Wednesday.

MUFG commented; “Overall the survey has put a dampener on optimism over the outlook for Germany’s economy.”

It did, however, note; “Bloomberg consensus forecasts are currently expecting a very gradual pick-up in growth during the 2H of this year before growth picks up more notably next year in response to the government’s plans for looser fiscal policy.”

The bank also notes that markets are still expecting the ECB to hold interest rates at 2.0% through the rest of the year which will limit potential Euro selling.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts