Pound to Euro Forecast: Analysts Flag GBP Vulnerability as EUR Gains Ground

Modified: Sunday, 28 September 2025 19:45 BST - Written by Frank Davies

STORY LINK Pound to Euro Forecast: Analysts Flag GBP Vulnerability as EUR Gains Ground

The Pound to Euro (GBP/EUR) exchange rate remains under pressure as Sterling sentiment stays weak, with fiscal concerns and tariff uncertainty weighing and Bank of America calling GBP the most vulnerable G10 currency in the near term.

By contrast, rising Eurozone inflation expectations have reduced the odds of further ECB cuts, with Danske Bank expecting rates to stay at 2% through 2026.

GBP/EUR Forecasts: Retreat to 8-Week Low

The Pound to Euro (GBP/EUR) exchange rate lost further ground on Thursday with a slide to 8-week lows just below 1.1430. The pair managed to secure only a slight recovery to 1.1435 on Friday.

Sterling sentiment remains fragile and the Pound has also been unable to gain support from gains in UK equities on Friday.

There has been some relief in the UK bond market with the 10-year yield retreating to 4.73% from an opening 4.76% with the 30-year yield around 5.56%.

Again, however, the Pound has struggled to benefit amid underlying fears.

Overall sentiment in the market remains fragile and ANZ commented; “On the fiscal side, with the Autumn Budget due in November, there are broader concerns about fiscal headroom in view of the expected spending plans and increase taxes for both households and businesses.

The bank also noted increased dependence of overseas capital inflows; “With reduced gilt demand from defined-benefit pension funds, the UK’s reliance on foreign inflows and taxes to fund deficits has increased.”

Bank of America considers that the Pound is vulnerable on a near-term view; “GBP remains vulnerable in G10 due to UK fiscal deterioration concerns. We like to express short-term bearish GBP view on the crosses vs another European currency like the EUR.”

There was fresh uncertainty over tariffs with President Trump announcing tariffs on Pharmaceutical and heavy trucks from October 1st.

There was a high degree of uncertainty over the impact, especially with potential exemptions.

Saxo UK investor strategist Neil Wilson commented; “The tariff news ought to add to the bearish narrative we’ve seen take hold in equity markets this week, but so far European equity markets are rising and US futures are a bit higher.”

European equities did post net gains during the session with traders waiting for further details to assess the potential outlook.

As far as the Euro-Zone is concerned, the ECB's monthly Consumer Expectations Survey was released on Friday.

Median expectations for inflation over the next 12 months rose to 2.8% for August from 2.6% a month earlier while expectations five years ahead increased to 2.2% from 2.1% and the highest level since August 2022.

The increase in inflation expectations will be noted by the central bank and will tend to increase resistance to further interest rate cuts.

Danske Bank commented; “In our view, the likelihood of further rate cuts from the ECB has declined further over the past month. We thus expect the key policy rate to remain at 2% until the end of 2026.”

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TAGS: Pound Euro Forecasts