Pound-to-Euro Forecast: Analysts Eye 1.12 in 6-12 Months

Modified: Friday, 7 November 2025 16:30 BST - Written by Frank Davies

STORY LINK Pound-to-Euro Forecast: Analysts Eye 1.12 in 6-12 Months

The Pound to Euro (GBP/EUR) exchange rate drifted lower on Friday, trading near 1.1350, as investors digested the Bank of England’s dovish hold and mounting expectations of tax increases in the November Budget.

Foreign exchange analysts warn that weak fundamentals could keep GBP/EUR under pressure into year-end.

GBP/EUR Forecast: Retreat to Near 1.1350

Pound Sterling recovered to 1.1380 in early Europe on Friday, but was unable to hold the gains and retreated to near 1.1350 as the British currency maintained a soft tone while there were no major Euro-Zone developments.

Danske Bank maintains a negative stance; “We expect EUR/GBP to trend higher the coming year, targeting the cross at 0.89 in 6-12 months.” (1.1240 for GBP/EUR)

There are strong expectations of tax hikes in the November budget and increased speculation over a December Bank of England rate cut in December with this combination of negative fundamentals continuing to undermine the Pound.

Equity markets also retreated which sapped Sterling support in global markets.

According to MUFG; “Dovish policy communication alongside the decision to leave rates on hold has put additional downward pressure on short-term UK rates and the GBP. We expect GBP weakness to extend further against the EUR heading into year-end if slower inflation is confirmed in October and November.”

Markets continued to digest Thursday’s Bank of England policy decision.

ING commented; “it now seems Governor Andrew Bailey is the swing voter and minded for a December cut. That outcome is only priced with a 70% probability right now, meaning that there is scope for lower short-term rates and a weaker pound.”

Rabobank noted hints from Governor Bailey that a rate cut was possible before the end of this year.

It maintains a cautious stance; “we’re hesitant to bring forward our call for the next rate cut from February to December. The hard data still needs to play ball, and recent survey indicators suggest that’s easier said than done. Governor Bailey may therefore wait for firmer evidence before switching sides, especially given the mixed signals we’re seeing.”

Fiscal policy could still prove to be a key influence with very strong expectations that there will be tax hikes in the November 26th budget.

In this context, it added; “if the Budget delivers front-loaded and meaningful consolidation, it could strengthen the MPC’s confidence that rates can be cut further. That, in turn, could prompt us to revise our forecast and bring the next cut forward to December.”

As far as data is concerned, Halifax reported that house prices increased 0.6% for October after a 0.3% decline the previous month with the annual increase at 1.9% from 1.3% previously.

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TAGS: Pound Euro Forecasts