Pound-to-Euro Steady as Fed Decision Looms

– Written by


Frank Davies

STORY LINK Pound-to-Euro Steady as Fed Decision Looms

The Pound to Euro exchange rate (GBP/EUR) held steady on Tuesday as French political jitters weighed on the single currency.

At the time of writing, GBP/EUR was trading around €1.1450, almost unchanged from Monday’s opening levels.

The Euro (EUR) struggled for traction on Tuesday as investors grew increasingly nervous ahead of a crucial French parliamentary vote on the country’s social security budget.

Markets fear the proposal may fail to pass, potentially triggering renewed political instability if Prime Minister Sébastien Lecornu cannot secure sufficient backing in parliament.

Adding to EUR pressure was weaker-than-expected German trade data. Exports stalled in October, rising by just 0.1% month-on-month. The figures underscore the challenges facing Germany’s export-driven economy amid weakening global demand, raising further questions over the Eurozone’s growth prospects heading into the final quarter of 2025.

The Pound (GBP) held firm on Tuesday, supported by a decline in UK government bond yields that helped bolster overall sentiment toward Sterling.

UK 10- and 30-year gilt yields have generally fallen since Chancellor Rachel Reeves’s autumn budget, which was well received by investors and appeared to ease concerns over the government’s fiscal credibility.

Sterling also benefited from a softening in expectations for aggressive Bank of England (BoE) rate cuts. While a reduction next week remains widely anticipated, markets are increasingly pricing in an end to the easing cycle by mid-2026.

GBP/EUR Forecast: Fed Decision Likely to Influence the Euro

Looking ahead to Wednesday, movement in GBP/EUR may be driven largely by shifts in the US Dollar (USD), given the Euro’s strong inverse correlation with USD ahead of the Federal Reserve’s key interest rate decision.

Although markets widely expect the Fed to cut rates, the move is largely priced in, leaving forward guidance as the likely source of volatility.

If Fed Chair Jerome Powell strikes a more hawkish tone — pushing back against expectations for deep easing — the US Dollar could strengthen, potentially placing fresh pressure on the Euro.

With no major UK data releases due, the Pound may lack a strong domestic catalyst and could trade in a relatively narrow range through the middle of the week.

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TAGS: Pound Euro Forecasts