Pound to Euro Forecast: Near-Term GBP/EUR Gains Capped Near 1.19

June 6, 2025 - Written by Frank Davies

STORY LINK Pound to Euro Forecast: Near-Term GBP/EUR Gains Capped Near 1.19

The Pound to Euro (GBP/EUR) exchange rate dipped after Thursday’s ECB rate cut was accompanied by hawkish rhetoric and a recovery faded quickly with the pair trading close to 1.1850 on Friday.

The US jobs report could spark choppy trading later in the session.

Although Pound sentiment remains relatively firm and the currency now holds a wider yield premium, a shift in Euro interest rate expectations has supported the Euro with greater doubts whether there will be further rate cuts.

UBS maintains a constructive Pound outlook, but expects GBP/EUR resistance close to 1.19.

MUFG also expects any near-term GBP/EUR gains will be capped near 1.19.

President Lagarde noted that the ECB is currently “well-positioned” to deal with the uncertain outlook and confirmed that the ECB is near the end of the current policy cycle.

Unofficial rhetoric from ECB sources following the meeting indicated that a further rate cut was unlikely at the July meeting.


Nordea commented; “We hold onto to our forecast that no further cuts will be seen, though risks remain tilted to the downside.”

It added; “We think the ECB is done cutting rates now, but this view is contingent on no major negative surprises surfacing and economic outlook to gradually become more robust in line with the ECB’s forecasts. Such negative surprises could stem for example from a collapse in the trade talks between the EU and the US, the imposition of further major tariffs, a more notable fall in sentiment data or further downside surprises in the inflation data.”

Danske Bank also pointed to Lagarde’s rhetoric; “Lagarde's repeated emphasis on the ECB's 'good position' was striking and suggests a significantly higher threshold for additional rate cuts.”

Ihe considers that hawkish voices have secured greater influence and added; “We remove a July cut from our forecast, now assuming a final 25bp cut in September to 1.75%, with risks tilted towards one additional cut in Q4.”

Rabobank We still believe that today’s rate cut marks the end of the cutting cycle, unless trade tensions escalate.

According to Nick Rees, head of macro research at Monex Europe; "We are inclined to treat Lagarde's hawkishness with a degree of caution, albeit given this shift in tone, we no longer see our previous forecast for a 1.50% terminal rate as the most likely outcome."

He now expects a low point at 1.75%


There will be a heavier UK calendar next week with the latest labour-market and GDP data.

The government is also scheduled to release its spending review which will outline departmental spending limits for the remainder of this parliament.

ING remains uneasy over the fiscal policy outlook and commented; “It’s not a budget, and doesn’t come with a forecast from the Office for Budget Responsibility, a prerequisite for making major changes to tax and spending. But tax increases are inevitable later this year, we think. And not just because of departmental spending pressures.”

Unease over tax hikes would tend to hamper the Pound while the UK bond market will be watched very closely.

UBS focussed on the yield spreads and remains broadly positive on the Pound; “the latest UK growth-inflation data mix speaks against swift policy easing by the Bank of England (BoE), which should help preserve the GBP’s attractive carry in the near term.”

Elsewhere, the Halifax reported that UK house prices declined 0.4% for May with the annual increase slowing to 2.5% from 3.2%.

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TAGS: Pound Euro Forecasts