Pound-to-Euro Forecast: Near-Term Sterling Bullish Ahead of EU-UK Summit

May 9, 2025 - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: Near-Term Sterling Bullish Ahead of EU-UK Summit

Thursday’s US-UK trade deal provided an element of Pound Sterling support against the Euro (and US Dollar) while there was a relatively hawkish Bank of England rate cut and the Euro lost ground amid a boost to global risk appetite.

In this environment, the Pound to Euro exchange rate (GBP/EUR) hit 5-week highs at 1.1820 before a retreat to 1.1790 on Friday.

ING maintains a positive stance on the Pound; “The proximity to the 19 May EU-UK summit can keep markets on the bearish side of EUR/GBP.”

It added; “A test of the big 0.840 support (where 100-day and 200-day moving averages converge) is a tangible possibility in the coming weeks.

This would equate to Pound-Euro conversion gains to 1.19.

Danske Bank, however, does not expect the more positive risk mood to be sustained; “An investment environment characterised by elevated uncertainty, widening credit spreads and a positive correlation to a USD negative environment, in our view, favours a weaker GBP.”

The relatively hawkish Bank of England rate cut will also maintain a positive Pound yield spread over the Euro


There were increased hopes that the US would secure further deals and adopt a more conciliatory stance towards tariffs. This undermined the Euro in global markets.

There are also expectations that the UK will be in a better position than the EU on trade grounds.

According to Pepperstone Senior Research Strategist Michael Brown; "Trump has been saying the UK is a great friend of the United States. The fact that the U.S. runs a big trade surplus with the UK, if we still end up with a 10% tariff on the back of a trade deal, I would wager that it's going to be a hell of a lot higher for places like the European Union or China or Japan or wherever else who are looking to strike deals."

As far as the UK-US trade deal is concerned, the overall 10% tariff on imports into the US will stay in place. Tariffs on car imports will be lowered to 10% with an annual quota of 100,000.

There will be an aluminium and steel trading zone with zero tariffs for the UK.

There will also be some tariff-free imports for Rolls Royce components.

In return, the US will see lower tariffs on a wide range of US agricultural products, machinery and chemicals.


There will be weeks and months of negotiations. Quilter Investment Strategist Lindsay James commented; "The contents of the deal remain very limited in their totality and we await the full detail before we can say if there is a winner from this negotiation.”

Bank of England Governor Bailey called for closer relations with the EU.

ING commented; “the UK has now signed two trade deals in quick succession (with India and the US), and that is keeping markets hopeful on trade talks with the EU – which would have much more meaningful implications for the UK, and can lend a hand to troubled British finances.”

Rabobank noted that the US-UK deal was related in part to protecting aerospace supply chains and the US was also able to secure an important benefit in terms of increased access to the UK market for agricultural exports

The bank added; “It remains to be seen whether the EU has the will and the mandate to do what PM Starmer just did.”

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TAGS: Currency Predictions Pound Euro Forecasts