British Pound to Euro Forecast: 1.15 Holds After French Credit-Rating Downgrade

Modified: Tuesday, 21 October 2025 09:30 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: 1.15 Holds After French Credit-Rating Downgrade

The Pound to Euro exchange rate (GBP/EUR) has continued to consolidate just above the 1.1500 level as markets debate Euro-Zone and UK fundamentals.

Equity-market gains have helped underpin the Pound, but fundamentals concerns persist and the Euro has been resilient.

ING maintains a cautious stance on UK fundamentals and sees scope for GBP/EUR to retreat gradually to 1.1360.

MUFG maintains a GBP/EUR target of 1.1240 on expectations that fiscal tightening will accelerate Bank of England (BoE) rate cuts.

After Friday's close, in an unscheduled decision, S&P Global downgraded France's ratings to A+ from AA- on on-going concerns surrounding fiscal policy.

According to S&P; "We expect policy uncertainty will affect the French economy by dragging on investment activity and private consumption, and therefore on economic growth.

Prime Minister Lecornu survived two confidence votes last week and S&P noted that passing a 2026 budget would provide greater clarity.

It added; "Nevertheless, in our view, uncertainty on public finances remains elevated ahead of the 2027 presidential elections."

ING commented; The calm on the French political side allowed the euro to recover a bit, but it's hard to get too comfortable with France. S&P downgraded the country from AA- to A+ in an unscheduled move on Friday, despite a draft budget providing for a deficit reduction having been released.”

UK economic policy will also be a key element for the Pound.

As far as monetary policy is concerned, the latest inflation data is scheduled for release on Wednesday.

Consensus forecasts are for the headline inflation rate to increase to 4.0% from 3.8% the previous month with the core rate edging higher to 3.7% from 3.6%.

The data will have a significant impact on BoE expectations.

MUFG commented; “We expect inflation to peak soon which may be evident in the UK CPI report for September released in the week ahead.”

In this context, MUFG still sees the potential for a BoE rate cut at the December meeting.

The UK budget will also be important for Pound sentiment. With widespread expectations of tax hikes, there will be persistent speculation over which taxes will be increased.

According to ING; “That appears like a double-edged sword for sterling. Any concerns about fiscal sustainability will hit back-end gilts and spill over into the pound, while higher taxation should dampen growth and raise chances of earlier BoE easing.”

Elsewhere, Rightmove reported that UK house prices increased 0.3% for October compared with the 10-year average October increase of 1.1% with an annual decline of 0.1%.

Rightmove’s Colleen Babcock commented; "Sellers who are serious about selling have had to acknowledge their limited pricing power and moderate their price expectations.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts