Pound to Euro Forecast: Tax Fears Weigh on Sterling, 1.1430 Support in Focus

Modified: Sunday, 12 October 2025 21:30 BST - Written by David Woodsmith

STORY LINK Pound to Euro Forecast: Tax Fears Weigh on Sterling, 1.1430 Support in Focus

The Pound to Euro exchange rate (GBP/EUR) slipped back below 1.1500 on Friday as tax fears and fragile UK fundamentals kept Sterling under pressure despite broader Euro weakness.

Currency analysts warn that a break under 1.1430 could trigger deeper losses ahead of the November budget.

GBP/EUR Forecasts: Budget Anxiety Caps Sterling

The British Pound Sterling struggled to gain traction on Thursday and Friday, with higher-tax expectations continuing to cloud sentiment.

Any renewed increase in UK bond yields would risk further GBP selling. And a further test of support.

Key support remains in the 1.1415-30 area with any break risking further sharp losses.

Euro-Zone political developments will be watched closely on Friday with another day of drama in France.

President Macron is scheduled to announce a new Prime Minister later in the day and will hold talks with most political parties later in an attempt to reach a consensus.

There has been some speculation that Macron will reappoint Lecornu to head a technocrat government, although this is unlikely to be welcomed by the opposition.

ING remains doubtful that there will be significant headway in dealing with underlying stresses. It added; “The market-appeasing pledge by outgoing PM Lecornu about delivering on budget obligations is hardly enough to price out French risk.”

It did, however, add; “That said, we still struggle to see material implications beyond the short-term for the euro, which can anyway benefit mildly from today's new PM announcement.”

Standard Chartered also noted underlying risks; “while there could be a short-term technical rebound in French risky assets, the long-term story is still murky. There are still structural issues in the French economy, such as soaring debt and fiscal deficits. It remains in doubt whether the 2026 budget, including a much-needed fiscal consolidation, can be passed in time, due to the political deadlock.”

Overall confidence in the UK outlook remains notably fragile.

The latest UK Rightmove survey recorded a slight improvement in the housing index to –15% from –18% previously, but underlying metrics were weak.

RICS head of market research & analytics Tarrant Parsons commented; “The housing market continues to struggle for momentum, with seemingly no clear catalyst on the horizon to spark a turnaround over the near-term. Buyer demand remains subdued, while agreed sales are still on a downward trend, reflecting a broader hesitancy in the market.”

He added; “Ongoing uncertainty around potential measures in the upcoming Budget is also likely adding to the prevailing cautious sentiment.”

Capital Economics UK economist Ashley Webb commented; “Whether this is the start of a marked downturn in the housing market will depend on the outcome of the budget. The prospect of tax rises has put the housing market on ice.”

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TAGS: Pound Euro Forecasts