2025 Forecast: Pound Sterling to Gain on Dollar, Struggle Against Euro

Modified: Sunday, 31 August 2025 21:07 BST - Written by David Woodsmith

STORY LINK 2025 Forecast: Pound Sterling to Gain on Dollar, Struggle Against Euro

The latest Pound Sterling forecasts for 2025 point to a split outlook, with GBP/USD expected to strengthen towards 1.39 while GBP/EUR struggles to break above 1.16.

Markets expect the Pound to climb against the Dollar as Fed rate cuts weaken the greenback, but stubborn 3.8% inflation, weak equities, and fiscal risks mean GBP/EUR is likely to stay capped near 1.16.

Analysts highlight that weaker UK equities, stubborn 3.8% inflation, and the prospect of a difficult autumn budget are keeping Sterling capped against the Euro, even as dollar risks support GBP/USD.

Pound to Dollar Forecast (GBP/USD)

The Pound to Dollar exchange rate advanced to highs around 1.3525 this week before slipping back to 1.3475 as Sterling underperformed alongside weaker equity markets. Analysts, however, still see scope for gains.

UoB commented; “The underlying tone still appears firm, and there is a chance for GBP to test 1.3545. However, 1.3575 is unlikely to come into view.”

Scotiabank maintained a cautiously bullish stance; “We see limited resistance ahead of the upper 1.35s and look to a near-term range bound between 1.3480 and 1.3580.”

Dollar sentiment remains fragile as Fed Governor Waller lobbied for an immediate rate cut, warning of rising labour market risks. According to MUFG, “Given the weak jobs report in August for July, next week’s data is very significant; the data will be critical in the pricing for the November/December FOMC meetings.”

Waller’s call for cuts has reinforced expectations of a move toward a 3.00% neutral rate in 2026, compared with 4.50% currently, which would weaken dollar support and leave GBP/USD biased higher.

Pound to Euro Forecast (GBP/EUR)

The Pound to Euro exchange rate once again failed to hold above 1.16 and retreated toward 1.1550, weighed down by weaker UK equities and persistent fiscal concerns.

Commerzbank turned more cautious on the outlook; “The latest data makes it clear that the United Kingdom is in a difficult situation, and our previously rather optimistic view of the pound is probably no longer justified.”

French political stress has eased slightly ahead of the September 8th confidence vote, but the broader Euro outlook remains mixed. ING noted; “The European Central Bank's July minutes showed the Governing Council isn’t as concerned about the euro’s strength as some had speculated, but multiple members did point to downside risks to inflation.”

Nevertheless, markets are sceptical of further ECB cuts this year, which underpins Euro resilience and keeps GBP/EUR capped below 1.16.

Overall, Pound Sterling forecasts highlight a diverging 2025 path: stronger against the Dollar as Fed easing gathers pace, but struggling against the Euro amid UK fiscal challenges and resilient ECB policy. Analysts warn that the 1.16 level will remain a tough barrier for GBP/EUR even as GBP/USD trends higher.

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TAGS: Pound Dollar Forecasts Pound Euro Forecasts