Pound to Euro Forecast: "GBP to Underperform EUR as Dollar Weakens"

April 16, 2025 - Written by James Fuller

STORY LINK Pound to Euro Forecast: "GBP to Underperform EUR as Dollar Weakens"

The Pound to Euro exchange rate has stalled a fresh round of demand for safe-haven assets.

GBPEUR was quoted at 1.16747 as risk conditions dominated the Pound Sterling on Wednesday, even though the latest UK inflation data did nudge the currency lower.

Market confidence dipped again following the warning from Nvidia that it faced $5.5bn in additional costs due to US Administration export controls to China on H20 chips.

Equities came under renewed pressure while gold surged to a fresh record high and the Euro secured fresh backing.

In this environment of US-China trade-war fears, the Pound to Euro dipped to lows around 1.1660.

There was, however, a brief recovery to near 1.1700 after China stated that it is open to talks if Trump shows respect and names a point person.

Inevitably, very choppy trading will continue in the short term.


ING commented; “The new EUR/GBP trading range could be something like 0.8500-0.8750 for the second quarter.” This would be a 1.1430 - 1.1765 GBP/EUR range.

According to MUFG; “We expect GBP to continue to underperform EUR as the dollar weakens but quicker than expected progress on a US-UK trade deal would help to quickly reduce that underperformance.”

Rabobank expects underlying tensions will continue; “even if tariff heat is dialled up and down, they are unlikely to disappear and other economic statecraft tools such as subsidies, export controls, and the politicised use of capital flows and FX policy are likely to join them.”

The Euro area recorded a current account surplus of EUR34bn for February which took the 12-month total to EUR411bn and 2.7% of GDP compared with EUR291bn last year (2.0% of GDP).

The strong balance of payments position will provide underlying Euro support, especially when risk appetite deteriorates.

The headline UK inflation rate declined to 2.6% for March from 2.8% previously and slightly below consensus forecasts of 2.7%.

The core rate edged lower to 3.4% from 3.5% and in line with market expectations.


The largest downward contributions came from recreation and culture, together with fuel, offset to some extent by higher clothing prices.

The CPI goods inflation rate declined to 0.6% from 0.8% while the services sector rate retreated to 4.7% from 5.0%.

MUFG commented; “While this is good news for the BoE and makes a 25bp rate cut a near certainty on 8th May, inflation is set to pick up in Q2 given the NICs tax increase on employers, the minimum wage increase and the rise in the utility energy price cap. All of these will see the headline CPI advance potentially to levels around 4.0%.”

The bank still sees a careful and gradual approach to monetary policy as justified.

As far as the ECB is concerned, there are strong expectations of a further 25 basis-point ECB rate cut at Thursday’s council meeting.

Guidance from the bank will be watched closely.

According to Danske Bank; “We expect Lagarde to highlight the downside risks to growth from the trade war while abstaining from giving any clear guidance on future rate decisions.

It added; “Going forward, we expect the ECB to deliver three 25bp cuts at the upcoming meetings, bringing the deposit rate to 1.50% by September 2025.”

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TAGS: Pound Euro Forecasts