Sterling Faces Autumn Pressure Against Euro, Rabobank Warns

Rabobank analysts warn that the British pound is likely to face renewed pressure against the euro as autumn approaches, citing persistent economic headwinds and shifting market expectations. In a note released this week, the Dutch bank outlined a cautious outlook for sterling, projecting that the euro could strengthen further in the coming months.

Why is Sterling Under Pressure?

The pressure on the pound stems from a combination of factors, including the UK’s sluggish economic growth, sticky inflation, and the Bank of England’s cautious approach to interest rate cuts. Rabobank notes that while the UK has avoided a recession, the recovery remains fragile compared to the eurozone’s more resilient performance. As of mid-2025, the market has priced in fewer rate cuts from the Federal Reserve than from the Bank of England, which further weighs on the pound’s appeal.

Rabobank’s currency strategists point to the divergence in monetary policy between the Bank of England and the European Central Bank as a key driver. The ECB has maintained a more hawkish stance, keeping rates higher for longer, which supports the euro. In contrast, the BoE is expected to ease policy sooner to stimulate growth, making sterling less attractive to yield-seeking investors.

What Are the Forecasts for GBP/EUR?

While Rabobank did not provide a specific target rate in the brief note, their overall stance suggests a move toward weaker sterling levels against the euro in the autumn. Analysts often look at the 0.85–0.86 EUR/GBP range as a key support zone; a break above could signal further downside for the pound. However, Rabobank emphasizes that the outlook is subject to change based on upcoming economic data and central bank communications.

The bank’s caution reflects broader market sentiment, with many forecasters trimming their GBP expectations for the fourth quarter. The UK’s fiscal position and the potential for political uncertainty ahead of the next general election also add to the negative narrative.

Impact on Businesses and Travelers

For UK businesses that trade with the eurozone, a weaker pound means higher import costs and reduced profit margins. Companies that rely on European suppliers may need to hedge their currency exposure more actively. For travelers, the exchange rate directly affects the cost of holidays and business trips to the euro area, making it more expensive to spend abroad.

Investors with exposure to UK assets should monitor the currency risk, as a falling pound can erode returns for foreign investors. Rabobank’s warning serves as a reminder to stay informed and consider hedging strategies in this uncertain environment.

Conclusion

In summary, Rabobank’s outlook suggests that the British pound will face continued headwinds against the euro into autumn, driven by economic divergence and policy expectations. While forecasts can change, the underlying fundamentals point to a challenging period for sterling. Keeping an eye on central bank signals and economic releases will be crucial for anyone affected by the exchange rate.

FAQs

Q1: What is Rabobank’s specific forecast for GBP/EUR?
Rabobank did not provide a specific target in the note, but the overall stance is bearish on sterling, expecting the euro to gain ground against the pound in the autumn.

Q2: Why is the euro expected to strengthen against the pound?
The euro is supported by the European Central Bank’s more hawkish monetary policy, while the Bank of England is expected to cut rates sooner, making the pound less attractive.

Q3: How could this affect UK consumers and businesses?
A weaker pound makes imports more expensive and reduces purchasing power for travelers to the eurozone. Businesses trading with Europe may see higher costs and need to manage currency risk.