British Pound-to-Euro Forecast: GBP Sinks Below 1.14 on Fiscal and Policy Jitters

Modified: Tuesday, 4 November 2025 17:45 BST - Written by Frank Davies

STORY LINK British Pound-to-Euro Forecast: GBP Sinks Below 1.14 on Fiscal and Policy Jitters

The Pound to Euro (GBP/EUR) exchange rate extended losses on Tuesday, slipping back below 1.1400 as Chancellor Rachel Reeves’ pre-Budget warning of tax hikes fuelled a surge in Bank of England rate-cut speculation and renewed selling pressure on Sterling.

GBP/EUR Forecasts: Close to 6-Month Lows

Confirmation of tax hikes in this month’s budget and a fresh surge in speculation over Bank of England (BoE) rate cuts this year have triggered further Pound losses with weaker equity markets also a key impediment.

The Pound to Euro (GBP/EUR) exchange rate dipped back below the 1.1400 level and traded close to 1.1350.

GBP/EUR hit 30-month lows near 1.1340 last week and a dip below this level would risk further losses.

MUFG expects losses to 1.11 by the second quarter of next year.

On Tuesday, Chancellor Reeves delivered an extremely unusual pre-budget speech in an attempt to prepare markets and consumers for a tough budget on November 26th.

There are very strong expectations of tax hikes and the overall narrative suggested that a key aim for the government was to put downward pressure on bond yields and put the BoE in a much stronger position to cut interest rates.

According to Kit Juckes, head of currency strategy at SocGen; “This is a budget that is intended to deliver lower interest rates, that is the whole plan here. If Reeves get that we will get lower rates and a weaker pound."

Neil Wilson, UK investor strategist at Saxo Markets; took a similar view; “The timing is potentially important ahead of Thursday’s BoE decision.”

According to James Rossiter, Senior Global Strategist at TD Securities; “This is also ahead of the BoE meeting so their view is out in the public. We think the BoE will cut rates on Thursday.”

Markets are pricing in at least a 50% chance of a cut this year.

MUFG commented; “While lower yields due to MPC rate cuts is GBP-negative, improved fiscal credibility is a supportive factor curtailing GBP selling further ahead.”

It will, however, be vital to sustain confidence.

Saxo’s Wilson commented; “Panic stations at Number 11 by the looks of it - offering a speech 3 weeks before the Budget that was only announced last night. The market is doubting credibility.”

He added; “The risk is that you deal a big blow to confidence in the real economy and hit growth, which makes it all for nought. Either way, fiscal tighter, monetary looser suggests sterling remains on back foot.”

As far as the Euro is concerned, there are expectations that the ECB will hold rates at 2%.

ING commented; “If anything, we think the ECB might cut once again, but the risks at the moment aren’t high, and we predict that the easing cycle is over.”

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TAGS: Pound Euro Forecasts