Pound Sterling Stabilises Against Euro and Dollar to Benefit on Risk Recovery

April 8, 2025 - Written by David Woodsmith

STORY LINK Pound Sterling Stabilises Against Euro and Dollar to Benefit on Risk Recovery

The Pound to Euro rate is seen marginally in the green on Tuesday quoted at 1.16771, while Sterling rose around 0.27% against the US Dollar at 1.27678.

Risk appetite has recovered on Tuesday with a rebound in equities from over-sold conditions while markets remain firmly focussed on tariff developments.

There is a greater sense of optimism that the Administration will look to negotiate with countries which are threatened with additional reciprocal tariffs, especially Japan, but tensions with China have intensified.

The Pound has not been able to capitalise on the recovery with the Pound to Euro exchange rate (GBP/EUR) sliding to 8-month lows below 1.1650 before a tentative recovery.

According to ING; “The euro’s high liquidity character continues to shield it from the much bigger volatility that has affected the likes of NOK, SEK and GBP in the past few sessions.”

The Pound to Dollar (GBP/USD) exchange rate slipped to fresh 1-month lows just above 1.2700 before a recovery to 1.2750.

President Trump has threatened to impose an additional 50% tariff on Chinese exports unless China removes the retaliatory 34% tariffs imposed on imports from the US.


In response, Beijing warned that it would not back down or yield to blackmail.

Tensions will remain extremely high, especially with the reciprocal tariffs due to kick in on April 9th.

In this context, sentiment is likely to remain extremely fragile.

The Chinese yuan has weakened sharply on Tuesday.

MUFG commented; “It follows the PBoC’s decision to set the daily fixing rate above the 7.2000-level for the first time since September 2023 which has added to building speculation amongst market participants that China could allow a bigger devaluation of the renminbi to offset the negative impact on external demand form the worsening trade war with the US.”

European currencies will find it very difficult to make headway if the yuan continues to slide.

There is further evidence that business confidence has taken a big hit


According to the latest Moody’s business confidence survey; “Global business confidence collapsed last week under the weight of the mounting global trade war. There were more negative responses to the nine questions in the survey than positive ones. This is the weakest survey reading since the U.S. banking crisis two years ago and the most significant decline in the survey results since the start of the COVID-19 pandemic five years ago.”

It added; “The percent of positive responses to the broad question regarding current overall business conditions fell to less than 20%—a reading that is historically consistent with recession.”

It now considers the probability of a downturn at 60%.

The crucial element will be whether the slide in business confidence is sustained and whether it translate into weaker activity.

There are concerns that tariffs will further undermine the already fragile UK outlook and further complicate fiscal policy while there will be pressure for sharper Bank of England rate cuts.

Former Bank of England Deputy Governor Charlie Bean called for the central bank to cut rates by 50 basis points at the May policy meeting.

According to Bean; “It is not just the tariffs that are the problem, it is the huge uncertainty these actions have created, delaying buying and investment decision by businesses and consumers.”

Berenberg bank expects the UK economy will be resilient; “If Donald Trump’s trade war and the equity market sell-off trigger a global recession, the UK would of course struggle. However, the UK is relatively well placed to weather the tariff shock. The additional 10% rate it faces is at the bottom end of the range imposed by the US. Healthy consumer finances, lower energy prices and a fall in interest-rate expectations will also help.”

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TAGS: Pound Dollar Forecasts Pound Euro Forecasts