British Pound to Euro Forecast: Sell GBP/EUR Rallies in 1.14 Area

Modified: Tuesday, 25 November 2025 10:05 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: Sell GBP/EUR Rallies in 1.14 Area

The Pound to Euro exchange rate (GBP/EUR) drifted back under 1.14 as UK fiscal uncertainty and Ukraine negotiations shaped sentiment ahead of the budget.

Analysts note that credible tightening may offer only modest support, while any hint of larger future tax hikes could pressure the near-term Pound Sterling outlook.

GBP/EUR Forecasts: Held Around 1.14 Handle

The Pound to Euro rate was unable to break 1.1400 last week and retreated to just below 1.1360 on Monday.

Markets will continue to monitor UK budget speculation and Ukraine peace talks in the short term.

MUFG maintains a negative stance on the Pound with a target of 1.1240.

ING expects GBP/EUR selling on any rallies to the 1.1400 area.

The UK bond market will be a key focus during the next few days.

On Monday, UK gilts held firm with the 10-year bond yield retreating to 4.53% from highs above 4.62% last week which will help underpin near-term Pound sentiment.

Speculation surrounding Wednesday's UK budget will be a key element for Sterling moves.

There are strong expectations that Chancellor Reeves will not income tax rates.

There are, however, also strong indications that there will be change on welfare policies which will cost £3bn. There will, therefore, be concerns that there will have to be substantial tax hikes to meet fiscal rules.

Measures such as a mileage tax for EVs would potentially not come into effect until 2028.

MUFG commented; “The decision to drop an income tax hike has cast doubt on the credibility of the government’s fiscal plans. Revenue raising measures are expected to be more back-loaded.”

The dependence on tax hikes late in the 5-year period would risk undermining confidence in the bond market.

There will also be an impact on Bank of England policy expectations.

ING commented; “Our baseline going into Wednesday's budget is that sterling's upside is probably quite limited on a credible/tight budget and that there is some sterling downside on the view that the 2026 Bank of England easing cycle is under-priced.”

Markets will be monitoring developments surrounding the proposed Ukraine peace plan.

The main impact for the Euro will come through any shifts in energy prices. European gas prices dipped further on Monday while UK natural gas prices also retreated to 3-month lows.

ING commented; “The fall in energy prices has led to the euro's terms of trade index rising to its highest level of the year – a clearly positive development for the euro.”

The German IFO business confidence index, however, edged lower to 88.1 for November from 88.4 the previous month and below consensus forecasts of 88.6. There was a slight net improvement in the current conditions index, but this was offset by a retreat in the expectations component.

The disappointing data will limit the potential for an improvement in Euro confidence.

The Euro will also be vulnerable if Ukraine peace talks stumble.

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TAGS: Pound Euro Forecasts