Pound to Euro Dips on UK Budget Fears as EUR Finds Support

Modified: Wednesday, 15 October 2025 22:30 BST - Written by Frank Davies

STORY LINK Pound to Euro Dips on UK Budget Fears as EUR Finds Support

The Pound to Euro exchange rate (GBP/EUR) edged lower on Wednesday as improving political sentiment in France lent support to the Euro.

At the time of writing, GBP/EUR was holding close to €1.1471, down around 0.2% from Wednesday’s opening levels.

The Euro (EUR) gained ground in mid-week trade, boosted by growing confidence that French Prime Minister Sébastien Lecornu will survive his first major parliamentary test.

Lecornu appeared to make headway in calming political tensions by securing an informal agreement with the Socialist Party, a key bloc whose support is essential for winning a no-confidence vote on Thursday.

To win them over, Lecornu reportedly agreed to freeze President Emmanuel Macron’s divisive pension reforms until after the 2027 election — a concession that helped soothe tensions across France’s fragmented political scene.

Markets welcomed the news, seeing it as a sign that France could avoid another abrupt government collapse, a scenario that has weighed heavily on the Euro in recent weeks.

Nevertheless, investors remain cautious. France’s fiscal challenges remain unresolved, and Lecornu’s fragile parliamentary position leaves his government vulnerable to future instability.

Adding to the Euro’s mixed performance, Eurostat’s latest industrial production data showed a sharper-than-expected drop in output during August, underlining the ongoing weakness in the Eurozone’s manufacturing sector.

The Pound (GBP) remained subdued through Wednesday’s session as speculation intensified ahead of Chancellor Rachel Reeves’s forthcoming autumn budget.

Speaking to Sky News, Reeves hinted that both tax rises and spending cuts are under consideration as the government contends with a reported £20bn shortfall in the public purse.

However, the comments did little to reassure markets already unnerved by signs of slowing UK growth and weaker labour market data earlier in the week.

Investors have consequently revived bets that the Bank of England (BoE) could deliver another interest rate cut before the end of this year.

GBP/EUR Forecast: Modest UK GDP Growth Could Steady Sterling

Looking ahead, the Pound to Euro exchange rate may find some support later in the week with the release of the UK’s latest GDP report.

Analysts are pencilling in modest 0.1% monthly growth for August. A stronger reading could give Sterling a brief lift, easing some concerns over the economy’s sluggish performance.

Conversely, if GDP comes in below expectations, the Pound may extend its recent losses, as weaker growth prospects would further complicate the government’s budgetary plans.

Meanwhile, EUR investors will keep a close watch on comments from European Central Bank (ECB) President Christine Lagarde for fresh direction on Thursday.

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TAGS: Pound Euro Forecasts