Pound to Euro Week Ahead Forecast: Divided Between 1.11 and 1.22 Targets

Published: Monday, 29 September 2025 10:00 BST - Written by Tim Boyer

STORY LINK Pound to Euro Week Ahead Forecast: Divided Between 1.11 and 1.22 Targets

The Pound to Euro exchange rate (GBP/EUR) outlook remains under pressure near 1.1430 as bond-market jitters and fiscal concerns weigh on Sterling.

Exchange rate forecasts remain sharply divided: Goldman Sachs sees losses to 1.11 on a 12-month view, citing labour market vulnerabilities and fiscal consolidation risks, while Scotiabank expects gains to 1.22 by the end of next year, arguing the pound’s fundamentals remain supportive.

GBP/EUR Forecasts: Watching the bond market

Goldman Sachs forecasts that the Pound to Euro (GBP/EUR) exchange rate will weaken steadily to 1.11 on a 12-month view.

In contrast, Scotiabank expects gains to 1.22 by the end of next year.

During the week, GBP/EUR dipped to 8-week lows below 1.1430 during the week amid renewed jitters in the bond market and higher yields.

Goldman Sachs notes that the Pound could gain yield support, but commented; “Nonetheless, we still see a sufficiently broad range of factors to support further Sterling underperformance versus European peers from here.”

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It added; “Vulnerabilities in the UK labour market, the need for further fiscal consolidations at the Autumn budget, global cyclical risks, and a challenging structural valuation picture still point to a gradual drift higher in EUR/GBP from here in our view. (GBP/EUR losses)

ANZ also noted potential vulnerability; “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.”

It added; “With reduced gilt demand from defined-benefit pension funds, the UK’s reliance on foreign inflows and taxes to fund deficits has increased.”

Scotiabank is more positive on the Pound fundamentals; “Political uncertainty relating to the UK’s fiscal outlook has moderated considerably, shifting sentiment in a constructive manner.”

It added; “The pound’s fundamental outlook remains bullish given the BoE’s cautiously neutral stance.”

Wells Fargo; “In light of still-elevated wage and price growth, we now expect the U.K. central bank to hold rates steady during the fourth quarter. We see BoE rate cuts resuming in early 2026, as economic growth and inflation slow more clearly.”

As far as the Euro-Zone is concerned, there was a notably weaker than expected German IFO reading for September with declines in the current conditions and expectations components.

ING commented; “The optimism of the first months of the year has swiftly been brought back down to earth. This does not automatically mean that hopes for a recovery should be given up entirely – but it does mean that the economy is set for yet another year in stagnation. It now really needs a ‘Fall of reforms’ to make sure that three years of stagnation are not followed by a fourth.

Rabobank noted that geo-political risk factors could undermine the Euro; “We start with the NATO statement, which met for the second time in two weeks to discuss matters under Article 4 of the Washington Treaty.”

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TAGS: Pound Euro Forecasts