Forecast: Pound Sterling Tipped to Slide Against Euro, but not the Dollar

Modified: Sunday, 7 September 2025 21:00 BST - Written by Tim Boyer

STORY LINK Forecast: Pound Sterling Tipped to Slide Against Euro, but not the Dollar

The latest Pound Sterling forecasts highlight a diverging outlook against the US Dollar and Euro.

The Pound to Dollar exchange rate (GBP/USD) is testing resistance near 1.3550 after weak US jobs data fuelled expectations of a September Fed rate cut, with some economists even calling for a 50bps move.

Updated Pound forecasts point to further gains against the US Dollar if Sterling can break above 1.3590, with strategists at MUFG eyeing 1.40 next year.

By contrast, the Pound to Euro (GBP/EUR) has struggled to extend support above 1.15, with bond-market jitters and fiscal uncertainty leaving Sterling vulnerable to renewed losses towards 1.1365.

Pound to Dollar Forecast (GBP/USD)

The Pound to Dollar (GBP/USD) exchange rate jumped to 1.3550 on Friday after weaker-than-expected US jobs data, before drifting to trade just above 1.3500.

A crucial element this week will be whether GBP/USD can break key resistance.

According to Scotiabank, GBP/USD holding 1.3550 is the key to re-testing the crucial 1.3590 area and a possible move to at least 1.3700.

Fed calls by investment banks will be a key element, although, importantly, the Fed is now in a blackout period ahead of the September 17th decision.

Standard Chartered has changed its Fed call; “While Fed Chair Powell was still describing the labour market as “solid” as recently as the 30 July FOMC, his stance had clearly changed by his Jackson Hole speech on 22 August. We think the August labour-market data has opened the door to a ‘catch-up’ 50bps rate cut at the September FOMC meeting, just as it did this time last year.”

A key question now is whether the bank will change its near-term forecast of GBP/USD being capped at 1.3590.

CIBC pointed to risks surrounding an aggressive policy; “The bond market would be quick to discipline the central bank by pushing long rates up if the easing at the front end became too aggressive. That would likely prove to be an important stop sign for the Fed.”

The bank also pointed to the high degree of uncertainty; “All that said, we’re going to keep an eye on the Fed nomination process in the month’s ahead. Economists are nearly 100% in agreement that there are material risks in a politicised Fed, and it’s a risk to our forecasts for yields, the US dollar and inflation.”

CIBC is reluctant to make a major forecast change at this stage; “But investors can hold only one portfolio, and as forecasters, we can print only one set of tables, and for now we’ll base those calls on what a rational central bank would do.”

MUFG expects GBP/USD gains to 1.40 next year.

Pound to Euro Forecast (GBP/EUR)

The Pound to Euro (GBP/EUR) exchange rate found support below 1.1500, but struggled to make much headway amid fresh unease surrounding the UK bond market.

UK and French bond markets will be crucial for the Pound in the week ahead. Any GBP/EUR dip below 1.15 despite French concerns would increase fears.

Rabobank expects GBP/EUR losses towards 1.1365 on bond-market fears and commented; “We view the pound as particularly susceptible to jitters at the long end of the curve.”

On Monday, the French government is scheduled to face a no-confidence vote on the budget, with strong expectations that it will lose the vote.

MUFG expects Euro resilience; “We are not expecting the unfavourable political developments in France to significantly impact next week’s ECB policy decision and/or the performance of the EUR.”

It added; “While we don’t expect the ECB to completely rule out further rate cuts, recent communication has indicated there is a higher hurdle. With the Fed expected to resume rate cuts soon while the ECB leaves rates on hold, policy divergence should continue to encourage a stronger EUR and weaker USD.”

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TAGS: Pound Dollar Forecasts Pound Euro Forecasts