GBP/EUR Forecast: 3-Month Pound Sterling Forecast of 1.15

April 23, 2025 - Written by Frank Davies

STORY LINK GBP/EUR Forecast: 3-Month Pound Sterling Forecast of 1.15

Global risk appetite has recovered strongly on Wednesday following another change in direction by President Trump.

Stronger risk conditions boosted the Pound, but the latest data triggered fresh doubts over the UK economic outlook which hampered the UK currency.

After an initial boost the Pound to Euro (GBP/EUR) exchange rate failed to hold the boost to 1.1715 with a retreat to 1.1665.

European business confidence data was also important and there was some evidence that the UK economy has been hit harder by trade fears than the Euro-Zone which hampered the Pound.

Conflicting pressures will continue with ING expecting risk conditions to dominate. It sees GBP/EUR gains to at least 1.1765 if confidence continues to improve.

Danske Bank, however, has a 3-month GBP/EUR forecast of 1.15.

The UK PMI manufacturing index retreated further to a 32-month low of 44.0 for April from 44.9 previously and in line with consensus forecasts while the services-sector index retreated sharply to a 27-month low 48.9 from 52.5 and well below expectations of 51.5.


The composite output index dipped to a 29-month low in contraction territory.

Total new work from abroad decreased sharply at the fastest pace for nearly five years.

Business confidence data dipped to the lowest level since October 2022 while employment declined further.

Costs increased at the fastest rate since February 2023 while output charges increased at the fastest rate for close to two years.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence commented; “The biggest concern lies in a slump in exports amid weakened global demand and rising global trade worries, but higher staffing costs have also piled pressure on companies.”

He added; “The collapse in confidence and drop in output during April raise red flags as to the near-term economic outlook and add pressure on the Bank of England to reduce interest rates again at its May meeting. There will be some uncertainty, however, as to whether the recent upturn in price pressures could become entrenched or whether it merely represents a short-term tax-related spike which should be 'looked through'.”

Capital Economics UK economist Alex Kerr expects a middle path for the bank; “Overall, although Trump’s tariffs may prove to be disinflationary for the UK eventually, the continued stickiness of near-term price pressures suggests that the Bank of England will continue to cut interest rates gradually from 4.50% now to 3.50% in the first half of next year.”


The Euro-Zone manufacturing sector was resilient for April at 48.7 from 48.6 previously while the services sector edged into contraction territory at 49.7 from 51.0 previously.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank commented; “the higher fiscal spending on infrastructure in Germany and defence spending across Europe should eventually benefit not just manufacturing but also the service sector, though with a bit of a lag.”

The March UK government borrowing requirement increased to £16.4 billion in March 2025 from £13.6bn the previous year and above expectations of £15.4bn.

Provisionally, the fiscal 2024/25 deficit increased to £151.9bn from £131.2bn the previous year and compared with the OBR forecast of £137.3bn.

Revenue increased, but there was a larger increase in spending. Debt interest payments increased to £4.3bn in March, the highest March figure since monthly records began in 1998.

According to Capital Economics deputy chief UK economist Ruth Gregory; "[Chancellor] Reeves may not be too far away from having to raise money again in the Autumn Budget, by cutting spending and/or raising taxes, to meet her fiscal rules."

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Pound Euro Forecasts