Pound-to-Euro Forecast: Political Reprieve Lifts GBP/EUR Above 1.15

Modified: Wednesday, 8 October 2025 10:00 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: Political Reprieve Lifts GBP/EUR Above 1.15

The Pound to Euro exchange rate (GBP/EUR) held firm above 1.15 as French political uncertainty dominated sentiment. A temporary reprieve in Paris offered short-term support, but bond market risks continue to loom over the euro.

GBP/EUR Forecasts: Aims to Hold Above 1.15

The Pound was unable to hold 2-week highs at 1.1530 against the Euro on Monday, but has held just above the 1.1500 level. The main focus remains on the French political drama with no major domestic impetus while UK equities have held firm which has provided some Pound protection.

The immediate outlook will remain more positive if GBP/EUR can hold above 1.15, but a move to at least 1.1560 will be needed to improve the underlying outlook.

Following the resignation of French Prime Minister Lecornu on Monday, President Macron managed to persuade him to stay in office for a further 48 hours in a last-ditched attempt to find some form of consensus.

If he fails to make a breakthrough, his resignation will take effect with President Macron facing tough choices.

ING commented; “calls for new legislative elections are growing louder across the political spectrum. In our view, the likelihood of fresh elections has increased substantially, though they may not resolve the underlying issue: a deeply fragmented parliament where multiple parties believe they hold a mandate to govern alone.”

According to MUFG; “Downside risks for the euro would increase if parliamentary elections were called before the end of this year extending the period of political uncertainty.”

ING expects further upward pressure on the deficit; “We forecast debt levels to reach at least 116.7% of GDP next year, up from 113.1% in 2024. This trajectory places France in the worst fiscal position relative to its EU peers.”

There is, therefore, the risk of further stresses in the bond market. Scotiabank commented; “The euro area government bond market is showing signs of renewed fragmentation, suggesting a potential headwind from sentiment.”

If there is further pressure on the bond market, the ECB has a tool called the Transmission Protection Instrument (TPI) where it intervenes when monetary transmission is compromised

According to ING; “the generally accepted notion that the ECB would intervene in such a scenario suggests that any negative reaction in the euro is likely to be isolated and short-lived, in our view.”

As far as data is concerned, German industrial orders declined 0.8% for August compared with expectations of a 1.2% gain and followed a revised 2.7% for July.

ING commented; “With US front-loading now behind us, German industrial order books are back at where they were at the start of the year: empty. However, there is a small glimmer of hope in the August industrial orders data as domestic demand finally picks up.”

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TAGS: Pound Euro Forecasts