British Pound to Euro Forecast: GBP/EUR Risks Slide Toward 1.11

Modified: Monday, 17 November 2025 07:00 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: GBP/EUR Risks Slide Toward 1.11

The Pound Sterling struggled to find a footing on Friday, with the Pound to Euro exchange rate (GBP/EUR) stuck near multi-year lows as investors reacted to mixed signals on tax policy and fresh speculation over Prime Minister Starmer’s leadership.

GBP/EUR Forecasts: Tax dominates

MUFG is forecasting that the Pound to Euro rate will slide to 1.11 by the second quarter of 2026.

Nordea considers that GBP/EUR can hold around 1.1360 with a firm Euro curbing the potential for any Pound gains.

GBP/EUR slumped to 30-month lows close to 1.1280 on Friday before a recovery to 1.1320 as overall volatility intensified. The Pound was undermined by increased domestic political uncertainty and weaker risk appetite.

The government faced increased political difficulties during the week. A warning from unnamed sources that Prime Minister Starmer would fight back aggressively against any challenge actually tended to increase speculation that he was vulnerable to a challenge.

Chancellor Reeves has been hinting very strongly that income tax rates would be increased in the November 26th budget but late in the week were suggestions of a major U-turn.

Although there was some chatter that improved forecasts had given the Chancellor more room for manoeuvre, the move triggered fresh uncertainty and unease.

There was a sell-off in UK bonds and equities which undermined the Pound in global markets while risk appetite also deteriorated.

The 10-year bond yield jumped to 4.56% from 4.44% the previous day.

MUFG commented; “The decision to drop the income tax hike could be viewed as the Labour leadership prioritizing their popularity with the public and the stability of the Labour party over doing what is best to restore confidence in the public finances.”

It added; “Nevertheless, we still expect the package of fiscal tightening measures to put a dampener on economic growth in the UK and create more room for the BoE to lower rates further. The releases this week of the weaker UK labour market and GDP reports have reinforced negative sentiment towards the pound in the near-term.”

According to BNY Mellon; “Despite ongoing speculation about the direction of the budget, the government’s push for tax rises suggests a strong intent to avoid a repeat of the 2022 mini-budget crisis.”

It still voiced some caution; “However, some reduction in gilts in addition to GBP has taken place more recently, so vigilance is still needed for U.K. Assets.”

Credit Agricole is backing medium-term Pound gains, but did express some concerns; “Given that Reeves in particular is seen by many as the guardian of UK fiscal stability, any change in her political fortunes may rattle the hard-won investor confidence in the UK’s commitment to fiscal prudence. In turn, escalating sovereign credit risks could undermine the appeal of GBP-denominated assets.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts