Pound to Euro Week Ahead Forecast: Further Gains to 1.17 Before Sterling Slide

April 20, 2025 - Written by Tim Boyer

STORY LINK Pound to Euro Week Ahead Forecast: Further Gains to 1.17 Before Sterling Slide

Foreign exchange strategists at ING predict that the Pound Sterling (GBP) will weaken to 1.15 against the Euro (EUR) on a 12-month view amid contrasting outlooks for fiscal policy.

Commerzbank, however, is forecasting Pound to Euro (GBP/EUR) exchange rate gains to 1.22 at the end of 2025.

Market conditions were slightly calmer during the week with an easing of very high volatility levels seen the previous week.

Reduced fear helped underpin the Pound with the FTSE 100 index also making a weekly gain. In this environment, GBP/EUR recovered to above 1.1700 before settling around 1.1665.

There has been a gradual decline in global bond yields during the week with the 10-year yield below 4.60%.

Lower yields will help improve the net fiscal position, but there are still concerns that the underlying position is precarious.

ING noted the importance of the UK bond market and commented; “Any move back in 10yr gilts to 4.90/5.00% could trigger some more independent GBP weakness.”


The bank considers a 1.1430-1.1765 GBP/EUR range is realistic for the second quarter.

The bank expects GBP/EUR will retreat later in the year; “EUR/GBP should start marching higher again in 2026 when eurozone growth gets a lift from fiscal stimulus and the market could be starting to price an end-2026 ECB rate hike.

The ECB cut interest rates by a further 25 basis points with the deposit rate now at 2.25% and warned over the Euro-Zone growth outlook amid fears over the implications of trade tariffs.

According to MUFG; “Overall, the rate decisions, the statement and the press conference were broadly in line with expectations. However, we would certainly conclude that there was a slightly greater emphasis on downside growth risks relative to upside inflation risks than perhaps expected.”

MUFG now expects cuts to 1.75% from 2.00% previously, but added; “The risk at this juncture is that the ECB could cut further this year, to 1.50%. But for now we will assess the tariff risks.”

Commerzbank noted the global shift; “the strong appreciation of the euro since the last rate decision and the risk of a flood of cheap Chinese goods into Europe reduce inflation risks somewhat. As a result, there is little reason for the ECB to surprise with a hawkish stance."

According to BNY Mellon the Euro is overbought; “The euro is now materially misaligned with rate expectations. While the ECB and Eurozone governments would welcome signs of reserve status for local assets, euro strength does not support their policy objectives.”


BNY noted that monetary policy is back to restrictive, equity valuations are sharply lower, credit spreads have widened and the euro is materially higher.

It added; “Even in the best-case scenario, growth expectations have been damaged.”

It therefore expects even more pressure for the central bank to take a more accommodative policy stance.

UK data did not have a major impact during the week. The headline inflation rate declined to 2.6% from 2.8% and slightly below expectations of 2.7% with the core rate edging lower to 3.4% from 3.5%.

The data suggested a net weakening in the labour market, but wages growth remains stubborn.

Markets overall remained confident that the Bank of England would cut interest rates at the May meeting with at least two further rate cuts over the remainder of 2025.

ING commented; “Domestically, we’re waiting on the UK data to show whether unemployment is rising or inflation is falling. We think the market is right to forecast three more Bank of England cuts this year, starting in May.”

Bank of America commented; “Going forward risks are rising for a faster cutting cycle than our base case of quarterly cuts with emerging downside growth risks and potential disinflationary impact of tariffs.”

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TAGS: Currency Predictions Pound Euro Forecasts