Pound to Euro Mid-Week Forecast: 1.17 Tested on Sterling Relief

April 23, 2025 - Written by Tim Boyer

STORY LINK Pound to Euro Mid-Week Forecast: 1.17 Tested on Sterling Relief

After a shaky start, the Pound Sterling (GBP) made some headway during Tuesday with a stronger tone in equities helping to underpin the currency.

After again finding support close to 1.1600, the Pound to Euro exchange rate strengthened to around 1.1670.

Danske Bank noted the continuing importance of financial pressures; "For EUR/GBP, key remains the global investment environment where elevated volatility and uncertainty and widening credit spreads provide a sour cocktail for GBP. In the very near-term, we have a topside bias for the cross."

The bank, therefore, expects net GBP/EUR losses.

Volatility will inevitably remain elevated in the short term amid further trade tensions and implications of dollar vulnerability.

In this context, there was further speculation that the Euro would benefit from flows away from the dollar.

Over the weekend, French President Macron stated that the Euro area was ready to take on the challenge on being a reserve currency.


Rabobank Global Strategist Michael Every was sceptical of such a move; “I continue to argue Europe is in NO way ready, or willing, to take on that burden, and any market ‘favouritism’ towards the Euro is a gift it won’t want to accept.”

If market conditions calm, there will be a greater focus on UK fundamentals including inflation and Bank of England policy.

According to Danske Bank; “There are though tentative signs that the disinflationary process is stalling in underlying measures. Key topside risks remain from rise in employer National Insurance Contributions, still strong wage growth and rising inflation expectations.

Nevertheless, it sees scope for steady rate cuts; “More broadly with UK inflation surprising to the downside the past months we think the BoE is set to continue easing at a quarterly pace, delivering its next 25bp cut at the upcoming meeting in May.”

HSBC commented; “On balance, we think policy risks lie to the dovish side. If a more dovish message does materialise, it could dampen GBP upside momentum.”

According to HSBC; “If the Bank of England deems the balance of risks has shifted more to the growth side from inflation, the capacity for more rate cuts could open up, and potentially produce a weaker GBP.”

It added; “Markets have repriced the expected terminal rate to 3.52%, from 3.97% on 25 March. However, more is likely to come, with HSBC economists forecasting cuts down to 3.00% by Q2 2026.


After initial caution due to inflation reservations, Bank of America (BoA) also expects a dovish BoE stance and added; “We move our year end BoE rate forecast from 3.75% to 3.50%.

If the economy stumbles, BoA sees the possibility that rates will be cut to 3.00%.

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TAGS: Pound Euro Forecasts