Pound to Euro Forecast, News: GBP Slips as German Economic Sentiment Boosts EUR

March 18, 2025 - Written by David Woodsmith

STORY LINK Pound to Euro Forecast, News: GBP Slips as German Economic Sentiment Boosts EUR

The Pound trended lower on Tuesday as the Euro gained support from a sharp rise in German economic sentiment.

At the time of writing, the Pound Sterling to Euro exchange rate (GBP/EUR) was trading at around €1.1865, down roughly 0.2% from Tuesday’s opening levels.

The Euro (EUR) advanced on Tuesday morning following an unexpectedly strong improvement in German investor confidence.

According to the latest survey from the ZEW Institute, economic sentiment in Germany surged to its highest level in over three years, jumping from 26 to 51.6. This was well above forecasts of 48.1, signalling growing optimism about the Eurozone’s largest economy.

The boost in confidence appears to be driven by expectations that Germany’s planned relaxation of its constitutional debt brake will unlock significant funding for infrastructure and defence, potentially providing a much-needed boost to economic growth.

The German Bundestag is expected to vote on these budgetary changes later in the day, with analysts largely confident the measures will be approved. If confirmed, this could add further momentum to the Euro’s gains.

The Pound (GBP) remained largely rangebound on Tuesday, with no major UK data releases to provide fresh impetus.

Sterling sentiment continues to be dampened by concerns over the UK’s sluggish economic growth, despite the government’s push for regulatory reforms.

Chancellor Rachel Reeves has urged UK regulators to reduce excessive bureaucracy in a bid to stimulate business investment. However, investors remain cautious about whether any meaningful changes will be implemented in the near term.

Looking ahead, the Pound Euro exchange rate is likely to be influenced by the upcoming Bank of England (BoE) interest rate decision.

While no policy changes are expected at this month’s meeting, the BoE’s forward guidance could create volatility in GBP exchange rates. Investors will be looking for any indications of when the central bank may begin cutting rates, which could weigh on the Pound.

Meanwhile, the Euro could find additional support on Wednesday if European Central Bank (ECB) Vice President Luis de Guindos signals a more optimistic outlook for the Eurozone economy in his scheduled speech.

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TAGS: Pound Euro Forecasts