Pound-to-Euro BoE Forecast: Markets Split on Bank Of England Outlook

Modified: Thursday, 6 November 2025 10:45 BST - Written by Ben Hughes

STORY LINK Pound-to-Euro BoE Forecast: Markets Split on Bank Of England Outlook

The Pound Euro exchange rate (GBP/EUR) attempted to recover ground ahead of Thursday’s Bank of England meeting, where a deeply divided vote on whether to cut rates is expected to determine whether GBP/EUR can build on its fragile rebound from 30-month lows.

GBP/EUR Forecasts: Attempted Recovery from 30-Month Lows

The Pound to Euro rate slumped to fresh 30-month lows near 1.1320 early on Wednesday before a tentative recovery to 1.1360.

GBP/EUR has scope to rebound if the Bank of England holds rates at 4.0% on Thursday, but MUFG expects rallies will fade quickly and the bank has a 12-month forecast of 1.11.

According to Rabobank; “we continue to favour a slow upward bias in EUR/GBP.” (Slow GBP/EUR losses).

All eyes will be on Thursday’s Bank of England policy decision as markets also continue to digest Tuesday’s pre-budget speech by Chancellor Reeves.

It appears likely that there will be a very close vote on Thursday as some members appear certain to vote for a cut while others will be strongly opposed which leaves the balance of power in the hands of a few centrist members.

Andrew Wishart, senior UK economist at Berenberg, expects a 6-3 vote to keep the Bank Rate unchanged.

According to Wishart; “The risk that robust nominal demand encourages companies to rebuild their profit margins by raising prices outweighs the downside surprise in wage growth in August and in CPI inflation in September, in our view.”

He added; “As current interest rates do not restrain aggregate demand significantly, we expect core inflation to remain sticky until early 2026.”

Nomura is in the opposing camp; “We expect the Bank of England to cut rates by 25bp at its 6 November meeting and to remove from its guidance any reference to interest rates being ‘restrictive'. We believe weaker data over the past month support a rate cut, but that there is probably only one voting configuration (5-4) that can deliver it.”

According to Deutsche Bank chief UK economist Sanjay Raja; “The case for a quarter-point rate cut has strengthened materially on the back of a dovish round of data.”

MUFG expects the BoE to wait until December and added; “In the meantime though, the pound is likely to continue to underperform on the expectations of a harsh budget.”

As far as economic data is concerned, the PMI services-sector index was revised significantly higher to 52.3 from the flash reading of 51.1 while business confidence hit a 12-month high.

Tim Moore, Economics Director at S&P Global Market Intelligence, commented; "The latest survey offered some positive signals for the UK service economy, with output growth stronger than the earlier 'flash' estimate for October, and therefore confirming a notable improvement from September's five-month low.”

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TAGS: Pound Euro Forecasts