Why ING Still Sees GBP Falling Towards €1.15 - Pound to Euro Forecast

Market impact: Bearish for sterling, but conditional

The key market issue is not the reported UK growth rebound itself; it is whether the improvement is strong and broad enough to alter Bank of England rate expectations. ING’s view is that markets are pricing roughly 48 basis points of BoE tightening by year-end, while its baseline assumes no hikes. That creates downside risk for GBP if incoming data fail to validate those expectations, because the pound would lose prospective yield support through a dovish repricing.

For GBP/EUR, the bias is moderately bearish. The ECB has already raised its deposit rate to 2.50%, and its projections reportedly keep inflation above target through 2028, leaving room for additional tightening even though future decisions remain data-dependent. This could widen the expected policy advantage in favor of the euro and support EUR/GBP toward ING’s 0.87 target—equivalent to approximately 1.15 in GBP/EUR.

For GBP/USD, the implications are also negative in ING’s framework, with a fourth-quarter target of 1.33. However, this leg is less clean than GBP/EUR because it depends not only on the BoE–Fed rate differential, but also on broad US-dollar direction and global risk appetite. A weaker dollar could offset some sterling-specific pressure, while renewed dollar strength would amplify it.

The reported UK GDP strength provides a bullish counterargument, but its market value is limited if it does not translate into inflation persistence or a change in BoE guidance. The expansion was also uneven, with consumer-facing services contracting, reducing the likelihood that one or two monthly GDP prints alone force a policy reversal.

What could invalidate the bearish view:

stronger UK wage or inflation data, more hawkish BoE communication, evidence that UK activity is broadening, or signs that the ECB will not deliver the further tightening currently implied. Conversely, softer UK inflation, weak services or labor-market data, and confirmation of persistent euro-area inflation would strengthen the bearish sterling interpretation.

Trader focus:

front-end UK and euro-area rate differentials, BoE and ECB guidance, UK inflation and wage data, services activity, and whether GBP/USD weakness develops alongside broader dollar strength. The immediate signal is therefore negative for GBP, especially against EUR, but dependent on rate-expectation repricing rather than GDP alone.