Pound to Euro Week Ahead Forecast: Further Losses to 1.1695 After Sterling Slide

April 7, 2025 - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: Further Losses to 1.1695 After Sterling Slide

President Trump’s move on tariffs triggered huge and destabilising moves across asset classes with FX volatility jumping to 5-year highs. Investment banks will be scrambling to adjust forecasts.

The Pound to Euro (GBP/EUR) exchange rate posted sharp losses with a slide to 17-month lows below 1.1750 on Friday before a tentative recovery.

The Pound was hurt by slide in equity markets with the FTSE 100 index sliding to 3-month lows while the US S&P 500 index slumped over 10% in 2 days.

Political and economic policy responses will be crucial in the weeks ahead. One key factor will be whether and how the EU retaliates with any UK counter-measures also very important.

ING expects further near-term GBP/EUR losses to at least 1.1695 after last week’s slide.

Nomura is also bearish on the pair on trade grounds.

Credit Agricole, however, expects a recovery to 1.2050 by the end of the year.


The US Administration announced a baseline 10% tariff on all imports into the US which came into effect on April 5th.

Many major countries, however, were given additional tariffs. Although labelled as reciprocal, the extra levies simply punished countries running trade surpluses with the US.

The overall EU tariff was set at 20%, Japan at 24% and China at 34%. These are scheduled to come into effect on April 9th while UK avoided further punishment.

The Pound losses were to some extent counter-intuitive given that the EU will fare worse on tariffs.

Sterling is always vulnerable when risk appetite deteriorates sharply and equity markets come under pressure.

ING commented on two other reasons; “The first is that the euro has better liquidity than sterling and will benefit more as investors leave the dollar.”

The bank also expects that there will be substantial impact on Bank of England (BoE) policy.


It noted; “The second is that the looming global trade war is proving the greater leveller for rate spreads. The 'exceptionalism' of high UK interest rates is being unwound, where UK two-year swap rates fell 12bp more than their eurozone counterpart yesterday. This may be a dominant theme in the near term.”

There was a shift in BoE pricing with markets fully pricing in three further rate cuts this year.

ING still expects three further rate cuts this year and added; “We have long felt that the Bank will take rates down to 3.25% in 2026. Markets are increasingly reaching this conclusion too.

The ECB is also expected to cut rates three further times this year.

ING does not at this stage expect a radical change in the GDP outlook with a net hit of around 0.2% or so

It did, however, add that tariffs would be more problematic if the US and eurozone enter recession. That’s not our base case in either economy, though a slowdown would still be felt much more widely across the UK economy and potentially be a much greater source of downside.”

Fiscal policy will also be in sharp focus given that the government already has very little room for manoeuvre.

Credit Agricole admits that are significant economic risks; “there is no denying that the actions of the Trump administration could complicate the already fragile UK economic outlook and, as a result, may erode the fiscal buffer that the Chancellor of Exchequer has put aside to help her avoid future fiscal austerity measures.”

There will also be pressure for the government to support industries most at risk.

The bank also agrees with ING that BoE policy is likely to take a more dovish turn.

Credit Agricole, however, still sees scope for GBP/EUR gains; “we think that the GBP should ultimately outperform the EUR in the long term especially if a potential trade war between the EU and the US contrasts with a trade deal between the UK and the US. We subsequently would expect EUR/GBP to head lower once again in the coming months.”

BNP Paribas is positive on the Euro outlook; “We see a number of parallels for EURUSD between now and the 2017-early 2018 period, when the pair rose from 1.05 to 1.25 and decorrelated from front-end rate differentials.

It forecasts EUR/USD gains to 1.14 which will tend to put pressure on GBP/EUR.

Nomura sees scope for capital flows back to the Euro area, especially given the scope for a shift out of US markets.

It added; “A shift of these flows back is a key upside risk to EUR.”

The bank also has concerns over the UK outlook; “The UK was less negatively impacted by tariffs than the euro area but has much less room to support its domestic economy via the fiscal channel, which suggests further economic divergence, as is already observable in survey data.”

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