Pound-to-Euro Rate Tipped to Drift to 1.1630 in 2025 say SocGen

May 14, 2025 - Written by David Woodsmith

STORY LINK Pound-to-Euro Rate Tipped to Drift to 1.1630 in 2025 say SocGen

The Pound to Euro (GBP/EUR) exchange rate is trading around 1.1880 and close to 5-week highs. Overall fear has continued to ease in global markets amid hopes that the US and China will step back from an escalating trade war.

According to ING, there is still scope for GBP/EUR to break above 1.1900 ahead of Monday’s UK-EU summit.

SocGen, however, expects GBP/EUR will stall around 1.19 and drift lower to 1.1630 by the end of 2025.

The UK FTSE 100 index remains close to 6-week highs and if overall risk appetite holds firm.

Bank of England members have also continued to express reservations over inflation trends and overall yield spreads will tend to favour the Pound if risk conditions hold firm.

There was further hawkish rhetoric from Bank of England MPC member Mann who voted against last week’s interest rate cut.

According to Mann, the labour market has been more resilient than expected even with indications that there has been some softening.


She also pointed to underlying inflation pressures and commented; "I need to see the loss of pricing power. I need to see that firms are starting to be much more moderate in setting their prices across a broad range of products.

She added; “Goods price inflation is actually going up, not down."

Mann also stated that a notable easing of financial conditions had influenced her call for rates to be held at 4.50%.

The latest UK inflation data will be released next week with the crucial data for April.

ING commented; “next week’s services inflation number will be much more consequential, given that April’s data is when the big annual price hikes kick in. We think this could come in a little below the Bank’s forecasts, which would help cement an August rate cut.”

A dialling back of the US-China trade war has increased optimism over the scope for further deals.

There has, however, been little sign of negotiations between the US and EU on tariffs with some on-going speculation that the US would take a hardline stance.


MUFG commented; “We still expect the 20% reciprocal tariff rate to be adopted by the US as it seems unlikely, given the construct of the EU, that we will get any quick trade deal negotiated with the US.”

SocGen added; “It has been easier for the UK, with its huge trade deficit, to forge a trade deal with the US than it will be for the EU, and that has helped it return closer to levels implied by the moves we have seen in relative rates.”

Higher tariffs would tend to sap support for the Euro.

As far as interest rates are concerned, there are expectations that the ECB will continue to cut interest rates.

According to MUFG; “Given our view that trade uncertainties will remain elevated and that the US economy will slow more notably through the second half of the year, we see scope for the ECB to lower the key policy rate by more than currently priced, to a level of 1.50% by year-end.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts