Pound to Euro Week Ahead Forecast: French Relief Lifts EUR, GBP to Target 1.12

Modified: Monday, 20 October 2025 14:00 BST - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: French Relief Lifts EUR, GBP to Target 1.12

The Pound to Euro exchange rate (GBP/EUR) held just above 1.15 as France’s political turbulence eased and investors weighed UK fiscal and monetary risks.

Foreign exchange analysts at ING expect gradual Sterling losses toward 1.1240 over the next year, while RBC sees the pair steady near 1.15.

GBP/EUR Forecasts: French relief

ING forecasts that the Pound to Euro (GBP/EUR) exchange rate will weaken gradually to 1.1240 on a 12-month view.

RBC Capital Markets expects GBP/EUR can hold at 1.15 by the end of next year.

There was choppy trading during the week with GBP/EUR settling just above 1.15. The Euro gained relief after French Prime Minister Lecornu survived two confidence votes while UK data was mixed.

Global equities dipped amid US-China trade fears and a slide in US regional bank stocks.

RBC expects solid Euro demand if risk appetite dips; “For EUR crosses, most term currencies are underperforming, suggesting EUR is beginning to flex its defensive status.”

RBC also notes that high yields will provide Pound support at times while the economy has been resilient.

It added; “If that holds up in the medium-term, sterling is perhaps not as unattractive as many people think even if there are reasons to look for weakness in the short-term.”

According to ING; “Neither currency looks particularly attractive now, but the fiscal and monetary risks for sterling are probably greater.”

Bank of England policy will remain a key element with markets not expecting further cuts this year.

Standard Chartered sees scope for a medium-term policy shift; “We believe BoE could prioritize supporting economic growth over its long-term 2% inflation target. Following a mixed set of August job data, we anticipate the UK domestic job market to weaken further, as reduced labour demand is likely to slow employment growth, and increased labour supply could put downward pressure on wage growth. This could ease inflation risks, allowing the Bank of England (BoE) to ease monetary policy.”

Fiscal policy will also be a key element with Chancellor Reeves confirming that taxes will be increased. In November.

Berenberg remains cautious on UK fundamentals; “Tax hikes in the 26 November budget should bring about a belated fiscal squeeze. At the same time, a squeeze on real household spending power from elevated inflation, slowing pay growth and stagnant employment should curb household spending growth.

It added; “Once the BoE is content that these forces have squeezed excess inflation out of the system, we expect it to reduce its bank rate by 25bp in February and April 2026 to a terminal rate of 3.50%.

Rabobank is still uneasy over French political risks; “Macron and Lecornu have bought time, but France’s fiscal—and economic—challenges remain.

It added; “Whether he survives the looming budget debate is another matter, as his fate now rests with MPs willing to back the budget. If the government sticks to its pledge not to invoke Article 49.3, a majority must actually vote for it.”

BNY Mellon refuses to rule out further ECB rate cuts; “We continue to see the EUR struggling for the rest of the year and downside surprises in upcoming PMI prints could open the door to December being a live meeting.”

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TAGS: Pound Euro Forecasts