**HSBC Revises GBP/EUR Forecast for 2025: Sterling Seen Ending Year at 1.1365**
*Original article by James Miller. This expanded version provides an in-depth overview of HSBC’s GBP to EUR forecasts as presented by exchangerates.org.uk.*
HSBC has updated its projections for the British Pound to Euro (GBP/EUR) exchange rate, offering fresh insight into how the currency pair may perform through the remainder of 2025. According to the latest forecast published by the global banking and financial services giant, the Pound is likely to weaken slightly by the end of the year, with a projected year-end rate of 1.1365.
This implies a modest drop from current trading levels, reflecting HSBC’s cautious stance on the UK’s economic outlook compared to its Eurozone counterpart. The bank’s updated exchange rate forecast takes into account a range of macroeconomic indicators, central bank policies, and geopolitical trends that are likely to influence currency movements in the near term.
Here is a comprehensive breakdown of HSBC’s 2025 GBP/EUR forecast and the underlying rationale driving their projections.
## Context and Current Market Dynamics
As of mid-August 2025, the GBP/EUR exchange rate has been hovering around the 1.15 level, slightly above HSBC’s anticipated year-end rate. The Sterling has shown notable resilience through the first half of the year, buoyed by relatively steady economic data from the United Kingdom, including marginal improvements in consumer spending, services sector performance, and inflation trends.
However, the Pound has struggled to sustain strong upward momentum against the Euro due to several factors, including:
– Persistent inflationary concerns in the UK
– A cautious tone from the Bank of England (BoE)
– Weakness in the UK housing and retail sectors
– Tentative investor optimism about the Eurozone’s post-recession recovery
HSBC suggests these opposing forces are likely to create a relatively narrow trading range for GBP/EUR during the rest of the year, with risk tilted slightly to the downside for the Pound.
## HSBC’s Key Forecast: GBP/EUR to End 2025 at 1.1365
HSBC’s forecast for a 1.1365 GBP/EUR exchange rate by December 2025 indicates a bearish sentiment for Sterling in the medium term. The projection is rooted in the belief that several pressures on the UK economy will eventually curb any significant appreciation of the currency.
The bank’s outlook centers on the following drivers:
### 1. Diminishing Support from the Bank of England
– The BoE has adopted a more data-dependent and cautious tone in its recent policy updates.
– Interest rate hikes, which once supported the Pound through 2023 and 2024, have plateaued, and markets are no longer pricing in further tightening.
– HSBC believes the BoE is unlikely to raise rates further this year, reducing potential yield-based support for the Pound.
– If inflation continues to edge lower or economic data weaken, the BoE may even consider modest cuts in early 2026.
### 2. Relative Economic Momentum: Eurozone vs. UK
– The Eurozone economy, although sluggish in 2024, is beginning to show signs of recovery.
– Germany, France, and Spain have reported solid improvements in industrial production and services sector performance in Q2 2025.
– In contrast, the UK economy remains fragile, with GDP growth weakening due to cost-of-living pressures and lower business investment.
– HSBC argues that this comparative advantage may drive Euro gains, or at the very least cap Sterling strength.
### 3. Fiscal Policy and Political Uncertainty in the UK
– Elections anticipated in 2026 are fueling political uncertainty. Voices across the political spectrum are calling for either a reduction in taxes or increased public spending, which may increase fiscal pressures.
– Public debt levels remain high as a percent of GDP, and investors may grow wary about the UK’s longer-term fiscal position.
– Policy in
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