Pound-to-Euro Forecast: Budget Nerves Limit GBP Support

Modified: Friday, 21 November 2025 08:16 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: Budget Nerves Limit GBP Support

The Pound to Euro exchange rate (GBP/EUR) found support above 1.1300 on Wednesday and has edged higher to 1.1340 on Thursday with both currencies struggling against the firm dollar.

Equity markets rallied after the results from US tech giant Nvidia with stronger than expected earnings triggering sharp gains in US futures and a rebound in European markets.

Stronger equities helped underpin the Pound in global markets, although confidence remains fragile with further tensions ahead of Wednesday’s budget announcement.

The UK 10-year bond yield was just above 4.60% and little changed on the day.

According to Bank of America; “While we believe GBP could see a relief rally after the UK budget day, current bearish momentum has not started to fade yet.”

It noted short-term GBP/EUR support at 1.1280 with the risk of renewed slippage if this level breaks.

ING commented; “The pound is trading with a moderate risk premium that appears likely to remain in place until the Budget announcement on 26 November, as the government's U-turn on income tax hikes has added a layer of uncertainty and unnerved bond investors.”

It added; “Our year-end target remains 0.88 for EUR/GBP,(1.1360 for GBP/EUR) as the risk premium may well abate after the Budget, but we expect part of it will be replaced by dovish repricing.”

According to RBC Capital Markets; “The Budget last year was poorly received by markets and sterling considerably weakened in the weeks that followed.”

It added; “So far, sterling looks well-behaved going into the Budget and a series of leaks may have reduced the event risk.”

Credit Agricole notes near-term negative Pound sentiment; “recent client meetings have suggested that FX investors remain very bearish on the GBP ahead of next week’s autumn statement and the aggressive fiscal austerity policies that it could unleash onto the UK economy. A worsening growth outlook has already made investors more dovish on the BoE and thus eroded the rate appeal of the GBP.”

There are also strong expectations of a December Bank of England (BoE) rate cut which would undermine yield support, but also act as a counter to fiscal austerity and ease concerns over the growth outlook. This, in turn, would lessen pressure for more aggressive BoE rate cuts next year.

It added; “we remain of the view that the UK rates markets are pricing in overly aggressive rate cuts in the UK at the time of writing, and maintain our above consensus outlook for the GBP.”

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TAGS: Pound Euro Forecasts