Pound to Euro Forecast: Sterling Stalls, Strong EUR Headache for ECB

May 1, 2025 - Written by Tim Boyer

STORY LINK Pound to Euro Forecast: Sterling Stalls, Strong EUR Headache for ECB

The Pound to Euro rate (GBP/EUR) hit 3-week highs around 1.1790 in Asian trading on Wednesday before a retreat to 1.1760.

GBPEUR is likely to face further near-term resistance close to 1.1800, but expectations of a dovish ECB stance will provide solid underlying Pound support.

There has been further evidence that UK business confidence has dipped and gains in UK equity markets have stalled, although the overall outlook is still broadly positive

The UK Lloyds Business Barometer declined to three-month low of 39% for April from 49% previously.

According to the survey, 70% of businesses expect to raise prices in the coming 12 months which will be a significant source of concern for the Bank of England.

Hann-Ju Ho, senior economist, Lloyds Commercial Banking, commented; "With the announcement of global tariffs from the United States on April 2, and the market volatility that followed, it is unsurprising that business confidence saw an impact this month.”

She was keen to put the data into context; "However, economic optimism remains higher than at the beginning of the year, showing businesses’ resilience in the face of recent challenges and overall confidence is still well above the long-term average of 29%, an average taken from over 20 years of analysis."


Nationwide reported that UK house prices declined 0.6% for April after no change previously and the annual increase slowed to 3.4% from 3.9%.

Chief Economist Robert Gardner noted that a dip in transactions and prices was expected after stamp duty changes at the end of March.

He added; “Nevertheless, activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential home buyers in the UK remain supportive.”

ECB policy will continue to be a key element with inflation expectations important for the central bank.

According to the latest survey, 1-year inflation expectations component increased to 2.9% in the latest survey from 2.6% and the highest reading since April 2024, although there was little change in the longer-term expectations.

Scotiabank commented; “The tone from the ECB has been broadly dovish, and it will be interesting to see (if, and) how these inflation expectations figures are discussed.”

Euro-Zone inflation data will be released on Friday with consensus forecasts for a decline in the headline rate to 2.1% from 2.2% with the core rate at 2.5% from 2.4%.


According to ING; “The bar is high for a material euro impact in case of hotter than expected inflation, given the ECB’s seemingly relaxed stance on price shocks and the euro’s strengthening offering some shield.

SocGen added; “Unless GDP growth and productivity pick up, the strong euro will be a headache for the ECB.

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TAGS: Pound Euro Forecasts