Pound to Euro ING Prediction: GBP/EUR Recoveries will be Capped Around 1.1975

March 10, 2025 - Written by Frank Davies

STORY LINK Pound to Euro ING Prediction: GBP/EUR Recoveries will be Capped Around 1.1975

The latest data on Euro-Zone investor confidence indicated a strong rebound which has underpinned the Euro. Fragile risk appetite has also tended to sap support for the Pound.

The Pound to Euro exchange rate (GBP/EUR) is trading just below 1.1900 and close to 5-week lows.

ING expects GBP/EUR recoveries will be capped around 1.1975.

The Sentix Euro-Zone investor confidence index improved sharply to -2.9 for March from -12.7 the previous month which was above consensus forecasts of -9.1 and the strongest reading since June 2024.

The expectations component surged to 18 from 1 and the strongest reading since July 2021. The overall index recorded the third-largest monthly jump on record.

According to Sentix; “The announcement of debt-financed armaments programmes (EU and Germany) and infrastructure investments (Germany) has investors positively euphoric about further economic development.”

Germany's 10 year yield, the euro zone benchmark, edged lower to around 2.82% on Monday from 16-month highs above 2.88% last week.

If yields increase further, there will tend to be net Euro support, although there will also be concerns over stresses within peripheral bond markets.

Elsewhere, German data recorded a 2.0% increase for January after a revised 1.5% decline previously while trade figures recorded a 2.5% decline in exports for the month.

ING commented; “Today's data confirms the bottoming out of Germany’s industrial slump. However, it is too early to call any substantial turnaround.”

Danske Bank is cautiously optimistic; “We expect the slow recovery to continue throughout the year due to lower monetary policy rates and rising real incomes.”

There are major developments which will have a Euro impact across all timeframes.

German CDU leader Merz will attempt to win backing for the EUR500bn infrastructure fund.

ING commented; “It is hard to see that last week’s fiscal big bang from the potentially incoming government will be able to lead to an immediate turnaround. However, if the announced stimulus is indeed delivered, it could provide a short-term confidence boost, and enhance the longer-term prospects of the German economy.”

MUFG added; “Last week’s outsized market reaction highlights that investors are very confident that plans for increased defence and infrastructure investment will be passed in parliament.”

There will, however, be notable disappointment if parliament fails to back the major policy shift with the Euro vulnerable.

Markets will be monitoring the Ukraine peace talks in Saudi Arabia while trade tensions will also be extremely important.

Evidence of a move towards a Ukraine ceasefire would provide some Euro support, although European security concerns will persist.

Fears over US trade sanctions against Europe will tend to sap potential Euro support.

According to ING; “Risks look evenly skewed here to the upside with more positive developments out of Europe/ECB re-pricing or to the downside with a refocus on looming tariffs.”

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TAGS: Pound Euro Forecasts