July 15, 2025 – Written by David Woodsmith

STORY LINK Euro to Pound Sterling Forecast: Possible “Break Through 0.8670”

Foreign exchange analysts warn that this week’s data could drive further gains in the Euro to Pound exchange rate, with a potential break above 0.8670 paving the way for a test of April’s high near 0.8735.

Pound Sterling (GBP) was subjected to renewed pressure against the Euro (EUR) late last week and, on Monday, was unable to take advantage of President Trump’s threat to impose 30% tariffs on the EU.

The Pound to Euro exchange rate (GBP/EUR) dipped to 3-month lows close to 1.1530 before a marginal recovery.

According to ING there is GBP/EUR resistance close to 1.1630.

It noted; “This week’s data could see EUR/GBP break through 0.8670 resistance in a move to challenge April’s spike high at 0.8735. (A break below 1.1530 for GBP/EUR would potentially lead to 1.1450).

MUFG maintains a GBP/EUR target of 1.1300.

The UK Recruitment and Employment Confederation (REC) and KPMG survey stated that their index of staff availability rose to 66.1 from 63.3 in May, the highest reading since November 2020.only the 2008/09 financial crisis and 2020 pandemic resulted in higher readings.

KPMG chief executive Jon Holt commented; “Ongoing geopolitical turbulence and the threat of rising costs, alongside the promise of technology efficiencies, mean companies continue to wait and see with their hiring.”

The latest UK labour-market survey will be released on Thursday.

ING commented; “In May, payrolled employees fell by quite a large 109k. Most expect this number to be revised up.”

It added; “If not, perhaps the UK labour market is in a weaker position after all, and the Bank of England (BoE) will have to cut rates more quickly.”

In comments over the weekend, BoE Governor Bailey commented; “I think the path [for interest rates] is down. I really do believe the path is downward.”

He added; “But we continue to use the words ‘gradual and careful’ because some people say to me ‘why are you cutting when inflation’s above target?”‘

Bailey did, however, note that there could be scope for a faster pace of interest rates if there is evidence of faster labour-market deterioration.

Over the weekend, President Trump stated that 30% tariffs would be imposed on the EU from August 1st.

The EU has adopted a controlled response at this stage and will not adopt counter measures until after August 1st.

Commonwealth Bank of Australia currency strategist Carol Kong commented; “It seems like financial markets have become insensitive to President Trump’s tariff threats now, after so many of them in the past few months.”

She added; “Judging by the limited market reaction, markets might think that the latest threat from Trump is actually a manoeuvre to extract more concessions.”

According to Rabobank; “it’s Trump’s negotiating style to put more pressure on the other side in the final stages before a deal is reached. And, as one official put it, Trump will never go through with this.”

ING noted the high degree of uncertainty; “We have given up speculating about any longer-term strategies in these trade negotiations. What the letters of the last days, and in particular the letters to the EU and Mexico, show is that we are nearing a make-it-or-break-it moment.”

Assuming there is no extension of the August 1st deadline, ING considers that the US pressure could lead to tangible results or the US Administration decides to scale back the tariff threat which would be positive outcomes.

It does consider a third option would be an all-out trade war which would inevitably destabilise economies and damage risk conditions.

Given that the KPMG survey noted that geo-political stresses were important in curbing recruitment, there will be further concerns that the trade uncertainty will damage the UK labour market and economy.

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July 15, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Forecast 2025: 1.40 by 2026, Then Rebound

The Pound to Dollar exchange rate (GBP/USD) dipped to 3-week lows, fractionally above 1.3450, on Monday before a tentative recovery to 1.3485.

The Pound has been undermined by increased chatter of a more aggressive Bank of England agenda to cut interest rates. The dollar has held firm, but there is still a high degree of uncertainty over Federal Reserve policy amid major economic and political dimensions.

According to UoB; “Looking ahead, if GBP were to break and hold below 1.3445, it may trigger a deeper decline towards June’s low, near 1.3375.”

Scotiabank commented that GBP/USD will need to regain the 1.3500 area quickly to alleviate the pressure for further losses.

Credit Agricole has a year-end GBP/USD forecast of 1.40 with scope for a Pound rebound.

In comments over the weekend, Bank of England Governor Bailey stated that he is convinced that interest rates will continue to decline. He also stated that the gradual and cautious policy towards rate cuts is still justified.

He did, however, add on the labour market; “If we saw the slack opening up much more quickly, that would lead us to a different conclusion.”

In this context, UK data will be watched closely this week with the inflation data on Wednesday and labour-market release on Thursday.

Interactive Investor head of investment Victoria Scholar commented; “Friday’s disappointing GDP figures, combined with these weak jobs figures boost the case for the Bank of England to cut interest rates in August.”

She added; “All eyes are on Wednesday’s inflation report with CPI expected to remain at remain around 3.4% in June, roughly unchanged for the third consecutive month.”

The core rate is forecast to hold at 3.5% for the month.

Marekts are now pricing to over an 85% chance of an August cut with a further cut before year-end.

Weak labour-market data and high inflation would be potentially toxic for the Pound with increased stagflation fears.

The US will release the latest consumer prices inflation data on Tuesday. Consensus forecasts are for the headline inflation rate to increase to 2.6% from 2.4%.

Markets will also focus strongly on the core data.

ING commented; “This is expected to start ticking back up to 0.3% month-on-month increases as the effects of tariffs finally start to show up, although the effects might be more sizeable in the July-September data than the June data.”

It added that expectations of a September cut could dip further and; “prove slightly positive for the dollar.”

Weaker than expected data would trigger fresh speculation over near-term interest rate cuts and increase US Administration demands for the Fed to act aggressively.

Over the weekend, there was further speculation that President Trump would look to dismiss Fed Chair Powell.

There were comments from National Economic Council Director Kevin Hassett that Trump does have the authority to fire Powell if there is cause.

In this context, there has been further chatter that allegations of excess spending on the Fed renovation programme would be used to justify the move.

Former Fed Governor Warsh also criticised the Fed; “It’s lost, lost its way in supervision, it’s lost its way in monetary policy, and all this big money on big, fancy buildings is just another indication.”

Importantly, these two have been cited as being on the short list to replace Powell.

Rabobank commented; “Is the Trump administration creating another bit of pre-text for firing Powell?”

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TAGS: Pound Dollar Forecasts