British Pound to Euro Forecast: GBP Lifted, but EUR Strength to Limit Upside

Modified: Thursday, 4 December 2025 07:31 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Lifted, but EUR Strength to Limit Upside

The Pound-to-Euro exchange rate (GBP/EUR) recovered to 1.14 after finding support at 1.1360, helped by stronger-than-expected UK services PMI data and limited Euro traction from stalled Ukraine talks.

Despite the bounce, medium-term prospects remain constrained by December BoE cut expectations.

A firmer Euro-Zone services sector and steady ECB stance continue to cap Sterling’s upside.

GBP/EUR Forecasts: Recovery to 1.14

The Pound to Euro rate found support at 1.1360 on Tuesday and has rallied to 1.1400.

The latest UK PMI services-sector data was stronger than expected which provided some relief and there was no breakthrough in the US-Russia talks on Ukraine which limited Euro support

From a medium-term perspective, there are expectations that the Bank of England will cut rates in December while the ECB is expected to keep rates on hold amid a stronger services sector.

Rabobank has a 6-month GBP/EUR forecast of 1.12.

The final reading for the UK PMI services-sector index was revised higher to 51.3 from the flash reading of 50.5, although this was still below the October reading of 52.3 and below the long-term average.

Employment levels continued to decline with the fastest rate of contraction since February

There was further strong upward pressure on costs, but charges increased at the slowest rate since the beginning of 2021.

Tim Moore, Economics Director at S&P Global Market Intelligence commented; "Survey respondents widely commented on business challenges linked to fragile client confidence, heightened risk aversion and elevated policy uncertainty in the run up to the Budget.”

There will be hopes that the ending of budget uncertainty will help trigger a rebound in confidence.

There are still strong expectations that the Bank of England will cut rates at the December meeting.

The Euro-Zone PMI services-sector index was revised higher to a 30-month high of 53.6 for November from 53.0 the previous month and compared with the flash reading of 53.1.

According to Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank; “The strong performance in the service sector was even enough to more than offset the weakness in the manufacturing sector, meaning that economic output in the eurozone grew slightly faster in November than in the previous month. We therefore expect the growth rate in the final quarter of the year to show a slight acceleration.”

MUFG noted that the Euro-Zone services-sector inflation rate increased to 3.5% for November and the strongest reading since April.

The data will discourage any talk of further cuts in ECB interest rates.

Rabobank commented; “The BoE is expected to cut rates further into 2026 on the assumption that UK CPI inflation will continue to trend lower. Insofar as the ECB has likely ended its rate cutting cycle, this should keep GBP on the defensive vs. the EUR well into next year.”

It added; “Against the backdrop of potential political stress, below average UK GDP growth and BoE rate cuts we continue to favour a slow upward grind in EUR/GBP.”

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TAGS: Pound Euro Forecasts