Pound to Euro Slips as UK Growth Outlook Weakens

Modified: Monday, 1 December 2025 22:16 BST - Written by David Woodsmith

STORY LINK Pound to Euro Slips as UK Growth Outlook Weakens

The Pound to Euro exchange rate (GBP/EUR) struggled at the start of the week, sliding lower in response to a downbeat outlook for UK growth in 2026.

At the time of writing, GBP/EUR was trading around €1.1376, down almost 0.3% from Monday’s opening levels.

The Pound (GBP) came under renewed pressure on Monday as investors reacted to fresh forecasts pointing to a slowdown in UK economic activity next year.

KPMG now expects the UK economy to grow by just 1% in 2026 — a notable slowdown from the 1.4% expansion projected for 2025.

These figures fall short of last week’s Office for Budget Responsibility (OBR) projections, which estimate growth of 1.5% in 2025 and 1.4% in 2026.

KPMG’s more cautious outlook reflects weakening consumer confidence and expectations of rising unemployment, with the jobless rate forecast to reach 5.2% in 2026.

Slowing wage growth and softer demand could also increase pressure on the Bank of England (BoE) to loosen monetary policy further, with KPMG predicting interest rates could fall to around 3.25% next year.

The Euro (EUR) opened the week on firmer footing, trending higher through Monday’s European session despite lacklustre manufacturing data from the Eurozone.

November’s final PMI pointed to a deeper contraction in factory activity, but the single currency managed to shrug off the weak reading.

Instead, EUR drew support from persistent softness in the US Dollar (USD), which continues to slide as markets increase their expectations of imminent Federal Reserve rate cuts.

GBP/EUR Forecast: Eurozone CPI Set to Drive Momentum

Looking to Tuesday, Eurozone inflation figures appear poised to guide the next move in the Pound to Euro exchange rate.

Economists expect headline CPI to edge up from 2.1% to 2.2% in November. A firmer reading would likely reinforce the view that the European Central Bank (ECB) has reached the end of its cutting cycle, potentially lending additional support to the Euro.

With no major UK data due, Sterling looks set to take its cues from global market sentiment and broader external drivers throughout Tuesday’s session.

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TAGS: Pound Euro Forecasts