Pound-to-Euro Forecast: GBP Eases with Tight BoE Vote Near-Term Risk

Modified: Thursday, 11 December 2025 07:31 BST - Written by Ben Hughes

STORY LINK Pound-to-Euro Forecast: GBP Eases with Tight BoE Vote Near-Term Risk

The Pound to Euro exchange rate (GBP/EUR) drifted to around 1.1440 as a divided BoE kept traders wary ahead of next week’s rate decision.

With several MPC members signalling caution and a tight vote likely, Sterling sentiment remains fragile.

Euro support has firmed on more hawkish ECB rhetoric, further limiting upside for the British Pound.

GBP/EUR Forecasts: Sterling Drifts Lower

The GBP to EUR exchange rate has been held in tight ranges with a marginal drift lower as tensions build ahead of next week’s Bank of England interest rate decision.

Comments from BoE officials suggest that there will be a tight vote at the December meeting with Governor Bailey potentially holding the swing vote.

In this environment, Pound Sterling traders will be wary of being caught out by an unexpected decision with caution a key element.

MPC member Lombardelli noted that budget measures would cut inflation, but still preached caution over the underlying inflation situation; "I am very worried that we are seeing more pressure on resources in the economy, and that obviously leads to price rises. I think you can see it in the labour market."

She added; "I am also perhaps less convinced than others (on the Monetary Policy Committee) about how restrictive monetary policy is at the moment, as in how far we are from reaching the end of the cutting cycle."

According to Deputy Governor Ramsden, the BoE should continue to cut borrowing costs gradually.

Fellow member Dhingra stated that she did not see the need for policy to be so restrictive.

Scotiabank commented; “Fundamental risk events are limited ahead of Friday’s trade and industrial production releases, and comments from the BoE remain relatively dovish signaling no material change in the outlook for lower policy rates.”

It noted that the 2026 outlook is opaque; “Markets are fully pricing a 25bpt cut at the next BoE meeting on December 18 however the outlook for 2026 appears less certain as policymakers assess the need for additional easing.”

As far as the Euro is concerned, ECB talk is significant. Scotiabank commented; “Rate expectations are showing signs of stabilization following their recent upward adjustment, reflecting renewed hawkishness from key policymakers at the ECB. The shift in rate expectations has lifted yield spreads and pulled them to fresh highs at levels last (briefly) seen in September 2024.”

Growth trends will still be watched closely with any near-term disappointment potentially sapping Euro support.

The Euro-Zone Sentix investor confidence index strengthened to –6.2 for December from –7.4 the previous month.

According to Sentix; “The Eurozone economy remains in a phase of stagnation. The overall index rose slightly by 1.2 points to -6.2 points. Current situation and expectations values continue to stabilise.

It added; “The situation is quite different for the German economy, which remains firmly in the grip of recession.”

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TAGS: Pound Euro Forecasts