British Pound to Euro Forecast: GBP/EUR Extends Losses as Budget Worries Deepen

Published: Wednesday, 29 October 2025 09:00 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP/EUR Extends Losses as Budget Worries Deepen

Pound Sterling Takes Another Tumble on Budget Fears

The British Pound remained under pressure in global markets on Tuesday and has failed to find any relief on Wednesday, with mounting fears over the UK’s fiscal position continuing to undermine investor confidence.

The Pound to Euro exchange rate (GBP/EUR) has slumped to 30-month lows just above 1.1360, despite relatively benign global risk conditions.

The slide in Sterling gathered pace this week as speculation intensified that the upcoming UK Budget will include fresh tax rises and tighter fiscal measures to plug a widening deficit.

There has been no official denial that the Office for Budget Responsibility (OBR) will downgrade the UK’s productivity outlook in its latest report for the Treasury — a move that could further expand the structural deficit and force Chancellor Reeves to tighten policy.

According to Danske Bank; “This means that the fiscal backdrop will be even more tricky than previously assumed, likely leading to a further GBP 10bn shortfall in fiscal wiggle room.”

It added; “We think the significant tightening of fiscal policy would trigger more easing from the BoE than currently priced and, by extension, put further downward pressure on short-end UK yields.”

In FX markets, MUFG continues to target a move in GBP/EUR towards 1.1240, signalling scope for further downside.

The Pound to Dollar (GBP/USD) exchange rate has also dipped to 12-week lows around 1.3220.
Scotiabank commented; “The pound’s soft performance on the session casts a bit of a pall over near-term technical prospects.”

It noted that the break below 1.3300 signals potential for additional weakness, with initial focus on early-August lows at 1.3140.
According to UoB; “The decline appears excessive, but with no signs of stabilisation just yet.”

For those with upcoming Euro or Dollar purchases, the latest Pound weakness highlights the value of comparing rates and fixing favourable exchange levels ahead of next week’s major central bank decisions — including the Bank of England and European Central Bank.

GBP/EUR Forecasts: Market Focus Turns to BoE and Fed Policy Decisions

The Bank of England (BoE) remains in focus, with markets pricing around a 30% chance of a rate cut next month.
Kamal Sharma, Senior FX Strategist at Bank of America, commented; “I don’t think the market thinks that ahead of a critical budget, the Bank of England will show its hands.”

However, momentum for a further 2025 cut could build quickly if fiscal tightening dampens growth.

Later on Wednesday, the Federal Reserve will announce its latest policy decision. Markets widely expect a further 25bp rate cut to 4.00%, with Fed Chair Jerome Powell’s comments set to be pivotal for near-term dollar direction.

According to ING; “While risks are slightly tilted to the upside for USD today, any rally should be smaller and shorter-lived than in September. The likely announcement of the end of QT could also limit USD upside.”

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TAGS: Pound Euro Forecasts