Pound to Euro Week Ahead Forecast: Split Between 1.11 and 1.2050 Outlook

Published: Monday, 13 October 2025 10:30 BST - Written by Tim Boyer

STORY LINK Pound to Euro Week Ahead Forecast: Split Between 1.11 and 1.2050 Outlook

The Pound to Euro (GBP/EUR) exchange rate spent another week trapped below 1.15 as UK fiscal concerns offset Euro weakness tied to France’s deepening political impasse.

Foreign exchange strategists warn that, with Prime Minister Lecornu reappointed and budget gridlock unresolved, both currencies are likely to face lingering downside pressure.

GBP/EUR Forecasts: Groundhog Day for France

SocGen forecasts that the Pound to Euro (GBP/EUR) exchange rate will weaken to 1.11 by the third quarter of 2026 on Pound vulnerability.

Credit Agricole, however, is backing gains to 1.2050 by the end of next year as the French situation contributes to Euro losses.

GBP/EUR briefly hit 3-week highs around 1.1550 during the week on Euro concerns before a dip back below 1.15 amid a lack of confidence in underlying UK fundamentals with the Pound unable to benefit from a record high for the FTSE 100 index.

French Prime Minister Lecornu resigned on Monday, but after a week of intense political intrigue, President Macron renominated him on Friday.

There is no evidence that Lecornu can fare better this time around and faces major difficulties in passing the budget with the on-going risk that deadlock will eventually lead to fresh elections.

SocGen does note the potential for short-term Euro weakness; “The French political situation is clearly another source of concern, with policy paralysis potentially dampening growth expectations. The bond market has to digest supply, and higher French yields create headlines. Even if yield differentials are far below those we saw for peripheral bonds in 2010-2015, this all weighs on the euro.”

Credit Agricole also notes near-term Euro vulnerability; “The economic outlook of the Eurozone’s largest economy has been attracting considerable attention. In all, we think that economic uncertainty and lingering political risks in France could keep the EUR on the defensive in the very near term.”

SocGen expects weak UK growth and that Bank of England will eventually relent; “The stickiness of inflation relative to the euro zone and the US is limiting the room for manoeuvre by the BoE so decreasing the level of policy restriction to boost growth must wait. SG economics postponed the next rate cut from November to February but maintain the terminal forecast of 3.0%.”

JP Morgan noted cracks in the UK economic outlook; “With last week’s UK PMI suggesting political uncertainty is starting to creep back into the UK data, this emphasizes the negative growth-fiscal feedback loop where weaker UK growth worsens the fiscal hole which holds long-end gilt yields higher than they otherwise would be and that triggers the stagflationary reaction function in the currency.”

HSBC expects further fiscal fears; “In the UK, it seems more like mission impossible – particularly for fiscal policy. We estimate the UK Chancellor may need to find around GBP30bn of additional consolidation at the 26 November Budget – a big ‘black hole’ to fill.”

It added; “Tax rises and spending cuts will not go down well with voters and her own party. But a non-credible plan – such as assuming unrealistic tax rises and spending cuts in four or five years’ time – or even a small tweak to the fiscal targets to allow more borrowing, could alarm the bond market.”

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TAGS: Pound Euro Forecasts