Pound-to-Euro Price Forecast: Higher Oil Prices Curb EUR Support

Modified: Friday, 24 October 2025 14:40 BST - Written by Ben Hughes

STORY LINK Pound-to-Euro Price Forecast: Higher Oil Prices Curb EUR Support

The Pound to Euro exchange rate (GBP/EUR) traded in narrow ranges on Friday, with fresh UK data helping Pound Sterling steady after an inflation-driven wobble earlier in the week.

GBP/EUR Forecasts: Back Above 1.1500

The Pound dipped to lows just below 1.1480 against the Euro on Wednesday following the lower-than-expected UK inflation data, but has recovered to trade just above 1.1500 on Thursday.

According to UBS, purchasing power parity analysis would indicate that GBP/EUR should be trading just above 1.20.

Pound sentiment has stabilised while the Euro has been hampered by higher oil prices.

President Trump announced sanctions on two Russian oil companies amid a lack of progress in convincing President Putin to back a ceasefire in the Ukraine conflict.

ING commented; “US sanctions on Russian oil producers triggered a rally in crude. So far, however, that has only erased October’s losses, and it remains unclear whether Russian oil flows will be affected enough to justify structurally higher prices.”

Domestically, the debate surrounding Bank of England policy will remain a key element.

Wednesday's inflation print with the headline rate holding at 3.8% compared with expectations of an increase to 4.0%, triggered fresh speculation that interest rates could be cut again this year.

Jefferies economist Modupe Adegbembo commented; "The MPC meeting in November is certainly live, but it comes ahead of the 26 November Budget, which could add to the Committee’s caution."

He added; "A move in December would allow the BoE to assess policy announcements in the Budget as well as additional data on inflation and wages."

Credit Agricole discussed the outlook; “Ultimately, any evidence that UK services CPI may settle somewhat lower than the 5% YoY expected by the BoE until the end of the year may come as a greater relief following the slight undershoot in the August mark.”

It added; “That may not be enough however to convincingly revive the chances of a November BoE cut, as there is value in waiting for the upcoming Budget decisions and their potential impact on supply & demand for the year ahead.”

HSBC is still relatively cautious; “given core CPI has remained above the BoE’s 2.0% target for 50 months policymakers are likely to remain cautious.”

It added; “From an interest rate differential perspective, UK rates are still priced to remain higher than both US and Eurozone rates over the next two years.”

Fiscal policy will also be a key element for wider Pound sentiment.

MUFG sees scope for a rebound in Pound confidence; “There’s clearly still scope for sentiment to weaken over coming weeks. But with an uptick in inflation avoided, BoE cuts seeming more likely and no nasty surprises in other recent data (e.g. public finances and monthly GDP) the mood music around the UK economy has improved somewhat this month.”

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TAGS: Pound Euro Forecasts