Pound to Euro Forecast: Market Bubble Talk Adds to Sterling Uncertainty

Modified: Sunday, 5 October 2025 22:30 BST - Written by David Woodsmith

STORY LINK Pound to Euro Forecast: Market Bubble Talk Adds to Sterling Uncertainty

Despite record-breaking UK equities, the Pound to Euro (GBP/EUR) exchange rate remained under pressure around 1.1465 as investors weighed whether lofty stock valuations can offset deepening concerns over UK growth and fiscal sustainability.

Analysts caution that any equity correction could drag the Pound lower.

GBP/EUR Forecasts: Resists Losses

The Pound to Euro (GBP/EUR) exchange rate has not been able to make headway and settled around 1.1465 after the latest round of UK data with tight ranges prevailing.

The PMI data has triggered fresh reservations over the UK outlook and fiscal fears are on-going, but the UK FTSE 100 index has hit a fresh record high amid further strong demand for risk assets and technology stocks.

There are concerns that equity valuations are excessive and setting up conditions for a heavy sell-off.

Swissquote Bank senior analyst Ipek Ozkardeskaya commented; “Valuations are high, and some investors wonder whether this is another tech bubble. But a bubble – by definition – isn’t a bubble until it bursts.”

Rabobank expects that fiscal reservations will trigger GBP/EUR losses to 1.1365 on a 3-month view.

The UK PMI services-sector index was revised down to a 5-month low of 50.8 in the final September reading from the flash reading of 51.9 and well below the August reading of 54.2.

Overall confidence weakened during the month with weak employment.

There was further strong upward pressure on costs, although pressures eased slightly and the rate of increase in charges slowed to a 3-month low amid strong competition pressures.

Tim Moore, Economics Director at S&P Global Market Intelligence, commented "UK service providers experienced a disappointing end to the third quarter as weak consumer confidence, delays to business spending decisions and falling exports all weighed on demand.”

He added; "Consequently, this summer's acceleration in output growth is now looking like a flash in the pan as elevated political and economic uncertainty has reasserted itself as a constraint on service sector performance.”

He considers that the data does provide cover for a shift in monetary policy; “signals of softening labour market conditions and easing inflationary pressures are likely to provide support to the more dovish shift in the policy debate at the Bank of England."

The final reading for the Euro-Zone September PMI services-sector index was revised slightly lower to 51.3 from the flash figure of 51.4, but this was still the highest reading for 8 months while the composite PMI output index strengthened to a 16-month high.

The Euro-Zone data was also higher than the UK equivalent.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented; “Things are running a little bit more smoothly in the service sector. After almost stagnating in August, business activity picked up more strongly in September.”

He added; “The increase in new business suggests that the sector is likely to grow again next month. However, new orders have not yet been sufficient to increase backlogs.”

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TAGS: Pound Euro Forecasts