Pound Sterling Forecast Signals Mixed Outlook Versus Euro and Dollar

Modified: Friday, 15 August 2025 12:22 BST - Written by David Woodsmith

STORY LINK Pound Sterling Forecast Signals Mixed Outlook Versus Euro and Dollar

Foreign exchange analysts forecast GBP/USD rising to 1.37 over the next 12 months, while GBP/EUR is expected to fall to 1.15, according to the latest bank projections.

Overall, consensus points to a stronger Euro, a weaker US Dollar, and a Pound Sterling performance between the two, with modest gains against the greenback and limited losses versus the single currency.

The consensus in global markets is that the Euro will be the strongest major currency over the year ahead, with further US dollar weakness anticipated, while Pound Sterling performance is expected to be somewhere in between.

In this context, investment banks overall see scope for limited GBP/EUR losses and a small net advance in GBP/USD.

GBP Forecast Updates:

• GBP/EUR forecasts included: Consensus 1.15 (12-month), ING 1.1235, Danske Bank 1.1235, UBS 1.1365, BoA 1.2050 (end-2025) & 1.26 (end-2026)
• GBP/USD forecasts included: Consensus 1.37, ING 1.36, Danske Bank 1.38, BoA 1.52 (end-2026)

Pound-to-Euro Bank Forecasts: Modest Losses Expected

Consensus forecasts are for the Pound to Euro (GBP/EUR) exchange rate to weaken to 1.15 on a 12-month view, reflecting expectations that the single currency will retain broad strength.


Monetary policy will be a crucial driver. The Bank of England (BoE) cut interest rates to 4.00% at the August meeting in a narrow 5-4 decision, while warning that underlying inflation pressures remain. Markets are now less confident of another cut in November.

ING expects another cut early next year, which could limit Pound Sterling support. The bank noted: “Our baseline view is that UK activity and inflation does turn lower – perhaps more in the first quarter of 2026 and sterling can stay offered against the euro for most of next year.” It forecasts the Pound to Euro exchange rate will retreat to 1.1235 on a 12-month view.

Danske Bank shares a similar view, citing inflation and the labour market as key factors. It also projects GBP/EUR at 1.1235 in a year’s time. UBS sees a more moderate decline to 1.1365.

Bank of America (BoA) is more upbeat, arguing that market pessimism has been excessive. It expects GBP/EUR to strengthen to 1.2050 by the end of 2025 and advance further to 1.26 by late 2026.

Pound-to-Dollar Bank Forecasts: Small Gains Ahead

As far as the GBP/USD forecast is concerned, ING remains cautious on the pound but sees the US dollar coming under renewed pressure in the months ahead as the Federal Reserve cuts rates. “We’re relying on the broadly weaker dollar trend for GBP/USD gains,” the bank noted, projecting a modest advance to 1.36 over 12 months.

Danske Bank is more negative on the dollar outlook and expects GBP/USD to reach 1.38 in a year’s time.


Federal Reserve policy remains central to the Pound to Dollar forecast. Beyond interest rate decisions, political developments could also influence the dollar. Former President Trump and Treasury Secretary Bessent have persistently called for substantial rate cuts, with markets now expecting three cuts by the end of this year, starting in September.

The question of Fed Chair Jerome Powell’s position will also be in focus, with his current term ending in May. Trump has suggested he could be removed sooner, a move that could raise concerns over central bank independence and weigh on the dollar.

BoA again stands out with a notably bullish long-term projection, forecasting the Pound to Dollar exchange rate at 1.52 by the end of 2026.

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TAGS: Pound Dollar Forecasts Pound Euro Forecasts