Introduction to Currency Forecasting
The Pound to Euro exchange rate remains a highly watched and closely followed metric in the world of finance. As of July 22, 2025, the rate has been capped below 1.1630, ahead of key UK and Eurozone PMIs and the ECB decision.
Current Exchange Rate
The Pound to Euro rate has consolidated just above 1.1550, with no further move to test the 1.1500 level, while the pair has remained blocked at 1.1630. MUFG noted that GBP/EUR has been held below this 1.1630 resistance for the longest period since early 2024, and it maintains a Pound Sterling target against the Euro of 1.13.
Upcoming Events
The UK and Euro-Zone PMI business confidence data, set to be released on Thursday, together with the ECB rate call, will be important in shaping the overall Pound and Euro debate. EU/US trade developments will also continue to be monitored closely. The ECB will announce its latest policy decision on Thursday, with consensus forecasts that the deposit rate will be left at 2.00%.
ECB Policy Decision
The central bank is often reluctant to change interest rates at the summer meetings, especially with trading volumes declining during the holiday period. The Euro to Dollar (EUR/USD) exchange rate has retreated from 45-month highs at 1.1830 seen at the beginning of July, but there will still be some concerns over the implications of currency strength within the central bank.
Impact of a Stronger Euro
A stronger Euro will hamper exports and put some downward pressure on cost pressures, which could revive disinflation fears. As far as the latest PMI business confidence data is concerned, markets are expecting a small net improvement. The central bank will be watching cost and pricing pressures within the data.
Expert Commentary
MUFG commented, "We are expecting the ECB to repeat the message from the June policy meeting that the stronger EUR continues to pose downside risks to growth alongside higher tariffs via their negative impact on exports, while posing downside risks to the inflation outlook as well." Looking at the currency impact, it added, "At best, any comments from the ECB displaying more unease over the recent sharp strengthening of the euro at this week’s policy meeting may have a dampening impact on the euro’s upward momentum, but are unlikely to trigger a sustained reversal of the current strengthening trend."
UK Economic Outlook
Comments from Bank of England Governor Bailey will be watched closely on Tuesday. The latest PMI business confidence data on Thursday will also be important for Pound confidence, with the latest retail sales data due on Friday. Consensus forecasts are for a slight net improvement for the business confidence data. MUFG remains concerned that expectations of fiscal tightening will undermine confidence, "The looming prospect of tax hikes in the autumn could discourage businesses and households from spending in the interim, contributing to weak growth continuing in Q3."
Interest Rate Cuts
There are strong expectations that the Bank of England (BoE) will cut interest rates next week. ING commented, "For now, fears about the BoE slipping behind the curve have been allayed by big upward revisions to May’s ominous drop in payroll numbers. But with employment having fallen in seven out of the past eight months, the Bank can’t take anything for granted. An August rate cut is all but guaranteed."
Conclusion
In conclusion, the Pound to Euro exchange rate remains volatile, with a range of factors influencing its movement. The upcoming ECB policy decision and UK PMI business confidence data will be closely watched, and expectations of fiscal tightening and interest rate cuts will continue to impact the Pound’s value. As the global economy continues to evolve, it is essential to stay informed about the latest developments and forecasts to make informed decisions about currency exchange and investment.
