Pound-to-Euro Budget Day Forecast: Make-or-Break for GBP

Modified: Wednesday, 26 November 2025 11:49 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Budget Day Forecast: Make-or-Break for GBP

The Pound to Euro exchange rate (GBP/EUR) edged up to 1.1379 as traders held back ahead of today’s make-or-break UK budget, with markets primed for a sharp reaction once fiscal details emerge.

Bond-market confidence remains the decisive driver, with implied volatility signalling deep caution despite firmer gilt yields.

Any failure to convince on long-term sustainability risks a renewed Sterling setback.

GBP/EUR Forecasts: Bond Market Reaction Crucial

The Pound-Euro found support at 1.1340 on Monday and has rallied to near 1.1380 amid tentative evidence of short covering ahead of Wednesday’s budget.

Narrow ranges may prevail today with trader paralysis ahead of the budget and ING expects GBP/EUR to trade around 1.1365 today.

Lloyds Bank sees key GBP/EUR support at 1.1280 with resistance at 1.1400.

There has been evidence of Sterling selling in options markets and any position adjustment could underpin the Pound today, but markets are braced for big moves tomorrow.

Monex Europe head of macro research Nick Rees commented; "The potential downside risks for the UK economy related to the budget are going to keep all eyes on sterling. So that's our real focus."

Markets will be looking at the net fiscal tightening together with the balance of near-term and long-term revenue-raising measures.

According to Bank of America; “We think the Chancellor still likely needs to do £27-32bn (0.9%-1.1% of GDP) in tax rises/spending cuts in the Budget to fill the fiscal gap and raise the headroom. This is slightly lower than before.”

The overall verdict is likely to be driven by the bond market which, in turn, will help drive the Pound reaction.

The 10-year yield held steady around 4.54% on Tuesday, but there are still significant stresses in Sterling markets.

ING commented that EUR/GBP 1-week implied volatility is currently at the highest relative gap since the 2022 mini budget.

According to the bank; “This signals that despite some recovery in back-end gilts, the currency market remains concerned ahead of tomorrow’s UK Budget announcement.”

Ebury head of market strategy Matthew Ryan commented; “the devil will be in the details, and if Reeves is unable to convince markets that she has a credible long-term plan for fiscal sustainability, then the pound could struggle on Wednesday. At any rate, brace for volatility in sterling this week.”

Swissquote senior analyst Ipek Ozkardeskaya sees an elevated risk profile; “tomorrow’s budget is “make-or-break’ for sterling, because either the Bank of England steps in to prevent a gilt flare-up if investors dislike what they hear, or to cushion the economy if tax hikes bite hard.”

Scotiabank, however, sees scope for a Pound rally; “UK fiscal concerns have been a dominant driver of GBP weakness, contributing to the bulk of the pound’s decline since mid-September. We feel that a lot of bad news is already priced, tilting the balance of risk to the upside with a (very) low bar to surprise.”

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