British Pound to Euro Forecast: GBP/EUR Softens as BoE Cut Fully Priced

Modified: Monday, 15 December 2025 07:01 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: GBP/EUR Softens as BoE Cut Fully Priced

The Pound to Euro exchange rate (GBP/EUR) slipped back toward 1.1380 after weaker UK GDP data reinforced expectations of a Bank of England rate cut this week.

Markets are now almost fully priced for a move to 3.75%, sharpening the focus on the vote split and guidance for 2026.

The decision will determine whether Sterling’s recent rally proves short-lived or stabilises.

GBP/EUR Forecasts: BoE decision time

Goldman has a 12-month Pound to Euro (GBP/EUR) exchange rate forecast of 1.0870 amid weak UK fundamentals.

Credit Agricole, however, is more positive and expects gains to 1.1765 by the end of next year.

GBP/EUR hit 7-week highs just above 1.1460 during the week before a slide to 1.1380 after weaker than expected GDP data and a sharp dip in equities.

The ONS reported that UK GDP contracted 0.1% for the second successive month in October compared with consensus forecasts of a 0.1% gain as the services sector contracted 0.3%.

The data reinforced strong market expectations that the Bank of England will cut interest rates to 3.75% at the December policy meeting.

According to Mizuho; “Altogether, the BoE could deliver another 5-4 vote for a cut in December, followed by February, April and July, taking Bank Rate toward the mid-point of neutral at 3%.”

Goldman Sachs considers UK fundamentals will undermine the Pound; “We see that combination of monetary easing and fiscal restraint as an important negative policy mix for the currency, and expect the relative domestic trends in Europe to keep Sterling as a regional laggard in 2026.”

The bank added; “The currency should receive little support from abroad too. Sterling is less levered to the potential acceleration in German fiscal spending and European growth than most other Euro satellites and also remains structurally overvalued versus G10 peers in our GSDEER model.”

SocGen expects limited net Pound losses due to shifts in yields; “We forecast UK rates to fall 1% between now and the end of 2026 with ECB rates falling by 25 bp over the next few months before rising back to 2% by the end of 2026. That's broadly consistent with EUR/GBP trading above 0.90 but not much above that level.” GBP/EUR below 1.11)

From a longer-term perspective, SocGen added; “The UK is a medium-sized open economy with a huge current account deficit that is clearly harder to finance than is the case in the US. In the longer run, this is the main reason to expect/fear that EUR/GBP will eventually trade above parity.”

According to Credit Agricole, there is only limited scope for BoE rate cuts; “This could reflect a slightly more optimistic outlook on the back of the recent easing of UK financial conditions in the wake of the autumn statement, for example.”

It added; “As a result, the MPC need not validate the still-dovish market outlook. We subsequently think that the GBP could remain supported vs the USD and even the EUR in the wake of the BoE meeting.”

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TAGS: Pound Euro Forecasts