Pound Sterling to Euro Forecast Slashed to 1.1765 in 3 Months at Goldman Sachs

April 8, 2025 - Written by Tim Boyer

STORY LINK Pound Sterling to Euro Forecast Slashed to 1.1765 in 3 Months at Goldman Sachs

The Pound is trading marginally lower against the Euro on Tuesday, with the GBP/EUR exchange rate currently quoted at 1.16497.

Equity markets recovered slightly from intra-day lows on Monday, but there was fresh selling around the Wall Street open and remained firmly in the red with sentiment very fragile.

The FTSE 100 index was 4.75% lower on the day and close to 12-month lows.

There was further very choppy trading with the Pound to Dollar (GBP/USD) exchange rate sliding to 1-month lows just below 1.2800.

According to Scotiabank, “there doesn’t appear to be any clear support ahead of the lower 1.27s.”

The Pound to Euro exchange rate (GBP/EUR) extended losses to trade at fresh 7-month lows around 1.1685.

Goldman Sachs has cut its 3-month GBP/EUR forecast to 1.1765 from 1.2050.


From here, two key elements will be the impact on economies and whether equity-market stresses spread to other crucial instruments.

ING noted that there has been evidence of increased dollar demand; “Three-month cross-currency basis swaps, a derivative that reflects non-U.S. demand for dollars, shot to their strongest level for the euro and the pound since late 2023.”

It commented that a further shift; “would be a sign of trouble and could briefly send the dollar higher before the Fed is forced to step in.”

ING also added; “Important now will be whether heavy equity losses and credit spread widening uncover some skeletons in the closet, just as the US Treasury sell-off exposed the poor hedging decisions of Silicon Valley Bank in March 2023.”

There has certainly been an important impact on confidence.

This was illustrated by the Euro-Zone Sentix confidence index which slumped to -19.5 for April from -2.9 previously.

According to Sentix; “Trump's tariff hammer sends the sentix economic indices plummeting globally. The overall index for the eurozone falls by 16.7 points to -19.5 points, its lowest level since October 2023. The euphoria for the economy in Germany / EU from the previous month has evaporated. In particular, economic expectations for the eurozone are falling at a record pace.”


The US confidence index also plunged for the second successive month with the lowest reading since October 2008.

There will still be uncertainty whether the slide in sentiment will translate into weaker growth or recession.

According to Capital Economics, “even if tariff rates are negotiated down to the 10% baseline, investors can expect lower global growth, elevated US recession risks and a Fed that’s constrained by the higher inflation that these levies will fan.”

There has been a shift in interest rate expectations. Traders now see over a 60% chance of a May cut and a 97% chance by mid-year with at least four cuts this year

Markets also consider a Bank of England May cut is inevitable and are pricing in at least two further cuts this year.

Commerzbank pointed to difficulties in setting policy for the Federal Reserve; “It has to manoeuvre between the recession rock and the inflation hard place. This is a significant difference to 'normal' recession phases, in which the Fed was able to concentrate on one task."

The bank added; "If it can't, a recession typically turns out to be more severe. And the recovery is slower. This should be kept in mind when thinking about the USD reactions. The US dollar has been a 'safe haven' mainly because the US has usually recovered from recessions faster than other major developed economies. This time it could be different."

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TAGS: Currency Predictions Pound Euro Forecasts