Euro and Pound Sterling Forecast to Surge Against Dollar say Scotiabank

April 25, 2025 - Written by Frank Davies

STORY LINK Euro and Pound Sterling Forecast to Surge Against Dollar say Scotiabank

Some recently released exchange rate forecasts suggest that both the Pound Sterling (GBP) and Euro (EUR) are positioned for further gains against the US Dollar (USD).

Major banks such as Danske and Scotiabank have significantly revised their currency forecasts, indicating bullish prospects for EUR/USD and GBP/USD over the next year. However, some caution remains regarding the extent of the Euro's recent appreciation, with analysts at Credit Agricole highlighting potential near-term downside risks.

The Euro to Dollar rate (EUR/USD) hit 3-year highs above 1.1450 early this week before a corrective retreat towards 1.1300.

US equities recovered ground while President Trump backed away from his threat to fire Fed Chair Powell and the Administration talked up the prospects for trade deals.

Investment banks are still scrambling to update forecasts under the new and radical US policy framework.

ING commented on the short-term view; “What we would say is that some further modest advance in US equities could drag EUR/USD back to the 1.1250 area.”

The Pound to Dollar (GBP/USD) exchange rate surged to test 3-year highs around 1.3430 before a limited retreat.


Danske Bank and Scotiabank have downgraded the dollar outlook while Credit Agricole considers that the Euro has been bid too high.

Danske has made substantial shifts to its currency forecasts. Two months ago, the bank was forecasting that EUR/USD would slide to parity on a 12-month view.

There was a partial change last month and a more radical shift in the latest update with strong EUR/USD gains to 1.22 in 12 months.

According to Danske Bank; “Since our last FX Forecast Update, the dominating theme for markets has been increased political turmoil in the US triggered by escalating trade tensions leading to mounting US recession concerns.”

It commented; “Longer term, structural challenges like US political shifts, the trade war, and capital rotation away from US assets suggest significant USD downside.

Danske remains cautious over the UK economic outlook, but the sharp dollar revision has triggered a strong revision to the Pound forecasts.

GBP/USD is now forecast to strengthen to 1.39 on a 12-month view from 1.31 previously.


Scotiabank noted the high degree of uncertainty; “The challenge for investors now is that there are multiple scenarios and projections based on how tariff policy will evolve and everything hinges on decisions made by President Trump.”

It added; “The easiest choice for investors now is to reduce exposure to the USD and US assets generally and reassess when developments allow for a little more certainty around prospects.”

Scotiabank has adjusted to the new reality; “We have downgraded our forecasts for the USD significantly for the next 12–18 months.”

It added; “but the danger for the USD is that the sell-off seen since January’s high quickens and extends more than we expect at this point. The USD remains—even now—quite strongly valued against its major currency peers. We do not exclude the risk of a further 5–10% fall in the broad value of the USD in the next few quarters.”

As far as Sterling is concerned it expects the Bank of England will have to maintain a cautious stance; “We also believe that the market is pricing a far greater amount of easing than what will actually be delivered, offering support to GBP as expectations are repriced.”

It summarised; “We anticipate some gains for the pound (GBP) against a weakening USD but it may struggle to improve materially against the EUR for now.”

The bank forecasts EUR/USD gains to 1.18 by the first quarter of 2026 with GBP/USD advancing to 1.37.

Credit Agricole considers that the Euro has strengthened too far and noted; “EUR/USD is looking excessively overvalued when compared to a short-term fair value that is derived on the basis of EUR-USD rate spreads among other FX drivers. We thus conclude that there is a limit to which EUR/USD can deviate from the EUR-USD rate spread and maintain a bearish view on the pair from current levels.”

It forecasts that EUR/USD will retreat to 1.12 by year-end, although GBP/USD can make further gains to 1.36.

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TAGS: Currency Predictions Pound Dollar Forecasts Pound Euro Forecasts