Pound Sterling to Euro Forecast: Limited GBP/EUR Gains to 1.19 in June 2025

June 3, 2025 - Written by David Woodsmith

STORY LINK Pound Sterling to Euro Forecast: Limited GBP/EUR Gains to 1.19 in June 2025

• GBP/EUR rebounds slightly after 10-day low
• MUFG sees Pound Sterling peak near 1.1900
• Trade tensions weigh on GBP sentiment
• Eurozone CPI drop supports ECB rate cut

The Pound to Euro exchange rate (GBP/EUR) dipped to 10-day lows near 1.1830 on Monday before edging higher to 1.1845 on Tuesday.

Trade, government spending plans and interest rates will all be intertwined in determining Pound confidence.

Yield spreads will support the Pound in the short term with strong expectations that the ECB will cut rates this week while markets expect the BoE will be on hold this month.

MUFG expects limited GBP/EUR gains to 1.1900 this month before a steady retreat to 1.1560 at the end of the year.

It is now less confident over the outlook and added; “We do however, see greater risks than a month ago that the pound could outperform our forecasts given the signs in May that the UK economy could prove stronger than expected and hence the MPC cuts by less.”

As far as trade policy is concerned, the US Administration’s threat to increase tariffs on steel and aluminium has complicated the US-UK relationship.


UK Trade Minister Jonathan Reynolds will meet U.S. Trade Representative Jamieson Greer on Tuesday to discuss how to implement a recent trade pact, as concerns mount over new U.S. steel tariffs.

Reynolds will also review recent political trade understandings with both the U.S. and EU.

Commerzbank noted the high degree of uncertainty; "For example, what benefit does it bring the United Kingdom to set tariffs at 10% if individual components are exempt and subject to ever-higher tariffs?”

Deutsche Bank senior economist Sanjay Raja remains cautious over the UK outlook; "Fiscal constraints will limit how much the UK can invest into its defence arsenal – prompting questions around the sustainability of the government's fiscal framework."

He also expects defence spending will be tangled with trade policy; "A potentially bigger role for the UK in European defence and security will require larger incentives from the EU vis-à-vis a refined trade deal."

Bank of America maintains a positive stance on the Pound; “Recent developments in UK trade talks, could unlock both portfolio and FDI inflows into the UK which have been tepid in recent years.”

MUFG sees some potential Pound support; “The labour market remains key in determining the path for the economy ahead but the trade deals done (US, EU and India) if coupled with better financial market conditions could see the UK economy outperform expectations.”


As far as Bank of England policy is concerned, Governor Bailey stated that the labour market has loosened somewhat and the path of slowing pay growth is still intact.

He did add that gradual and careful remain his guides for rates.

Predictably, Bailey refused to make any prediction about the June rate decision.

MPC member Mann stated that services-sector inflation is still too high to be consistent with the 2% target.

Deputy Governor Breedon has gained confidence that UK disinflation is progressing and is confident that wages growth will decline to below 4.0% by the end of 2025.

She did, however, see the risk that supply-side difficulties are being under-represented.

According to Bank of America; “We expect cuts in August, September and November to 3.5% by year-end. But the bar has risen, and risks are tilted towards fewer cuts.”

The headline Euro-Zone inflation rate declined to 1.9% for May from 2.2% previously and slightly below consensus forecasts of 2.0% while the core rate declined to 2.3% from 2.7%, below expectations of 2.4%.

According to ING; “The CPI release today will not alter well-cemented expectations for a cut on Thursday, but may increase speculation of a more dovish message by President Lagarde.”

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TAGS: Pound Euro Forecasts