April 10, 2025 – Written by David Woodsmith

STORY LINK Pound to Euro Rate Dragged Lower by EUR/USD Rally to 1.11

A EUR/USD rally past 1.11 on foreign exchange markets has dragged the Pound Sterling lower against the Euro on Thursday.

The Pound Euro (GBP/EUR) exchange rate weakened on Thursday following US President Donald Trump’s U-turn on his global tariffs.

On Thursday, the Euro (EUR) gained strength against most of its trading partners as Donald Trump announced a 90-day pause on global tariffs for all countries, except China, with a temporary 10% tariff.

In response to this shift, the US Dollar (USD) continued its downward trend during Thursday’s European trading session.

Due to the inverse relationship between the Euro and the US Dollar, the Euro capitalised on the USD’s decline, rising against the majority of its counterparts.

On Thursday, the Pound (GBP) managed to hold its ground against most of its rival currencies, even in the absence of significant economic data.

Despite the lack of major British economic indicators, Sterling maintained its strength, partly because of a decrease in expectations for an interest rate cut by the Bank of England (BoE).

With the UK bond markets stabilising, the probability of a BoE interest rate cut next week dropped from almost 100% to 78%, offering support to the Pound.

Looking ahead to Friday, the primary drivers of movement for the Pound Euro exchange rate will likely be the economic releases from both the UK and the Eurozone.

In the UK, the latest GDP figures are set to be released, and if the index reports an expected minor rebound, it could provide a positive boost to GBP exchange rates, helping to end the week on a strong note.

Meanwhile, in the Eurozone, Germany will unveil its latest inflation data.

Should the Consumer Price Index (CPI) report a downturn as expected, it could put downward pressure on the Euro, potentially weakening the single currency as the week draws to a close.

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TAGS: Euro Forecasts Pound Sterling Forecasts

April 10, 2025 – Written by Ben Hughes

STORY LINK Pound to Dollar LIVE: Soft Inflation Print Sends Sterling Past 1.29

The US Dollar (USD) lost further ground against the Euro (EUR) and Pound Sterling (GBP) following the latest weaker-than-expected US inflation data.

The Pound to Dollar rate jumped to highs just above 1.2950 before settling around 1.2910.

According to Scotiabank; “Fundamentals are shifting in the pound’s favor as markets pare back their expectations for BoE easing, offering support via wider UK -US spreads.”

It added; “the focus is now on the 1.29-1.30 congestion range that had prevailed through much of March and the first couple of trading days in April. Resistance is expected between 1.31 and 1.32 while support is expected below 1.28.”

The Pound to Euro (GBP/EUR) exchange rate continued to lose ground, however, and retreated to 1.1615 from near 1.1650 ahead of the data with overall Pound confidence still fragile.

US consumer prices declined 0.1% for March compared with consensus forecasts of a 0.1% increase with the year-on-year inflation rate declining to 2.4% from 2.8% and below expectations of 2.5%.

Core prices increased 0.1% compared with expectations of another 0.3% increase with the annual rate slowing to 2.8% from 3.1%.

According to the Bureau of Labor Statistics; “Indexes that increased over the month include personal care, medical care, education, apparel, and new vehicles. The indexes for airline fares, motor vehicle insurance, used cars and trucks, and recreation were among the major indexes that decreased in March.”

The data eased inflation fears to some extent and traders were confident in pricing in at least three Fed interest rate cuts this year.

Goldman Sachs’s Kay Haigh commented; “We expect the Fed’s initial reaction to be cautious, but the risks remain that a sharper than expected slowdown in the economy could result in a resumption of the Fed’s easing cycle.”

According to Scotiabank; “Markets surged in response to the pause news but confidence in US policymaking has been severely dented and markets will remain vulnerable to trade-related headlines while the US and China continue to slug it out.”

It added; “Markets can breathe a sigh of relief but there are still major challenges here.”

There are also still reservations surrounding the UK bond market with the 10-year bond yield traded close to 4.70% from intra-day lows around 4.65%.

According to ING; “any greater slowdown in the UK economy, which would hit revenues/raise welfare spending, would only hit gilts harder. Clearly, then, the gilt market is an Achilles heel for sterling.”

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TAGS: Pound Dollar Forecasts

April 10, 2025 – Written by David Woodsmith

STORY LINK Euro to Dollar Forecast RAISED to 1.14 in 12 Months at Danske Bank

Since the US tariff policy was unveiled, the Euro (EUR) has been subjected to very choppy trading against the US Dollar (USD).

EURUSD is currently trading at 6-month highs just below 1.12 handle, quoted at 1.11936 (+2.22%).

A move above 1.1280 would be a 3-year high.

Several Investment Banks Slash Dollar Forecasts, New EUR/USD Targets Published

Many investment banks have maintained a bullish stance on the US dollar over the past few months based, to an important extent, on US exceptionalism.

There was talk of EUR/USD sliding to parity, but several key banks have now shifted their view and further forecast revisions are inevitable in the short term.

Nordea, for example, commented; “We have made a complete reversal in our dollar outlook and now expect the dollar to weaken rather than strengthen.”

Goldman Sachs has shifted its view sharply; “We have made a major shift in our Dollar view after seeing the developments of the last few weeks and rethinking the likely implications of these policy changes. We now expect recent Dollar weakness to persist, particularly in DXY terms.”

Goldman has increased its 12-month EUR/USD forecast to 1.20 from 1.02 previously.

Nordea has abandoned its call for a EUR/USD slide to 1.04 and has raised its end-2025 forecast to 1.12 from 1.07.

There has been persistent optimism that the US economy would out-perform Europe with this strength also encouraging further capital flows into US asset markets and maintaining strong dollar demand.

Expectations of Trump Administration tax cuts underpinned US growth hopes while there were also expectations that US trade tariffs would tend to underpin the dollar on defensive grounds.

The dollar index (DXY) hit 2-year highs in early January on a wave of Trump trades, but has since slumped close to 8% to 6-month lows.

Reaction to the aggressive trade policy has been a key element with the dollar weakening rather than strengthening amid the slide on Wall Street.

Scotiabank noted; “An unusual aspect of the recent market volatility is that the USD has fallen in tandem with the sharp decline in US equities. The lack of haven bid for the USD amid the sharp rise in broader market uncertainty and volatility raises a valid question about whether the USD is losing its “traditional” safe-haven status.”

The bond market has also been under sustained pressure.

HSBC delved into the statistics.

It noted; “It is rare to see US 10-year Treasury yields go up, the S&P 500 decline, and the USD struggle.

According to the bank, this has happened less than 7% of times.

HSBC commented that; “it could amplify concerns how a regime shift is unfolding and a bigger USD test is coming via its structural vulnerabilities.”

The bank is less confident in its bullish dollar view; “We have pushed back against such concerns over the years given resilient US growth supporting high yields and solid foreign demand for US assets. Yet, we cannot easily brush aside the USD’s structural weaknesses, especially given the current climate.”

Goldman cited three reasons for changing its view; “the combination of an unnecessary trade war and other uncertainty-raising policies is severely eroding consumer and business confidence. Second, negative trends in US governance and institutions are eroding the appeal of US assets for foreign investors. Third, rudimentary calculations and a constant back-and-forth makes it difficult for investors to price outcomes other than high uncertainty.

Danske Bank expects a notable negative economic impact; “Trump’s tariff proposals are set to significantly increase the weighted average tariff on US imports to levels not seen since the 1920s. Taken together, the tariff measures proposed this year would amount to the largest tax hike on the US consumer since World War II. In our view, this materially increases the risk of a US recession in 2025.”

Danske Bank has raised its 12-month EUR/USD forecast to 1.14 from 1.06.

Scotiabank sees an erosion of defensive support; “The USD’s safe haven status is being eroded as market participants grapple with the aggressive shift in US trade strategy, the implications for its trading partners, and the alternative opportunities available to traditional holders of US Treasuries as a result of changing fiscal attitudes in Europe.”

Nordea focussed on a shift in fiscal policy with attempts to curb US Federal spending. It commented; “The opposite is happening in rest of the world. Europe is focused on increasing military expenditures and public spending.”

Germany has launched a EUR500bn infrastructure plan and a new coalition has been agreed.

Nordea added; “The shifting fiscal policy and economic outlook is in favor of the euro versus the dollar, which is being reinforced by capital flows in the same direction. The rest of the world is overallocated in the US compared to historical average and a normalization will lead to further net dollar sales.”

ING noted an important element of uncertainty; “second-guessing the President’s next move has been a painful process to many, and ultimately we think he will get his way with a broadly weaker dollar, albeit a story for later this year and into 2026.”

The bank will adjust its forecasts shortly and is likely to downgrade dollar forecasts.

According to SocGen; “The global economy’s best hope is that this trade war is short. The alternative outcome is weaker growth for everybody, and a sharp slowdown in capital flows to the US, which would trigger a significant fall for the dollar.”

UBS has a March 2026 EUR/USD forecast of 1.14.

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TAGS: Currency Predictions Euro Dollar Forecasts

April 10, 2025 – Written by James Fuller

STORY LINK EUR/GBP Outlook: Pound Dips vs Euro on Drop in UK gilts, Rise in Yields

Pound Sterling is under pressure as gilts drop. EURGBP rose to 0.866 on Wednesday. The S&P500 closed 9.52% higher on Wednesday as Trump paused tariffs at a 10% rate. China was hit with further tariffs as the trade war escalates.

It’s a challenge to keep up with the news flow and manic moves across global markets. Wednesday was perhaps the wildest session of the recent week, and the 9.52% gain in the S&P500 was the third largest ever and has only been bettered by bear market rallies in 2008.

President Trump announced a 90-day tariff reprieve (excluding China) just two days after calling the same story fake news. The bond markets may have forced his hand – when stocks and bonds fall together there is no safe haven. This is what he posted on Truth Social

“I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately.”

Looking ahead, the US still has a major issue with China, and Trump’s poste increased tariffs yet again.

“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately.”

China has vowed to fight to the end and increased its tariffs to 84%. It seems both sides are prepared to effectively stop trading with eachother.

As well as a huge rally in stocks, other market made significant moves, with gold, copper and oil all surging higher. Higher oil and higher yields are problematic for the US and for Trump who has vowed to lower them. The 10Y yield closed at 4.3%, 12% higher than Friday’s low.

Markets Recover but Remain Edgy

The tariff reprieve has lifted spirits and sparked some huge rallies in risk assets, but risks remain high and the volatility in markets is a sign of underlying problems. As ING note:

“The increased volatility will also remain, preventing a full restoration of risk sentiment. Markets will not easily forget these episodes with wide market swings and thus the demand for safe assets should remain elevated. 10Y Bunds, for one, significantly outperformed swaps during the peak stress episode underscoring their safe haven role, even if they are now trading above the swap curve again.”

Currencies have remained stable but with a “risk off” tone as safe havens like the yen and Swiss Franc are outperforming, as is the euro due to its liquidity and stability. A flee from US assets may be underway and the US dollar remains under pressure near the 2025 lows. Notably, this is against a backdrop of higher yields.

The Pound Plunges Against the Euro

Market volatility has been weighing on the pound which is not seen as a safe haven. EURGBP broke above 0.85 on Monday and already reached 0.866 on Wednesday.

Sterling weakness stems from the drop in UK gilts and rise in yields which has been exacerbated by tariffs and global market stress. We know from earlier occurrences this not a positive for the pound and reflects tight finances. As ING explain:

“That UK gilts even underperformed US Treasuries is quite remarkable and probably very unnerving for the UK’s Debt Management Office. One view here is that the DMO is already pushing the limits with £300bn of new issuance this year and that any greater slowdown in the UK economy, which would hit revenues/raise welfare spending, would only hit gilts harder. Clearly, then, the gilt market is an Achilles heel for sterling.”

Three cuts are now expected from the BoE who are coming under more pressure to support the economy, even though inflation concerns persist.

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April 10, 2025 – Written by Frank Davies

STORY LINK GBP/USD Prediction: Pound Sterling Outlook Flips “Neutral-Bullish” say Scotiabank

Examining the short-term outlook, the Pound Sterling (GBP) is tipped to extend its recent recovery against the US Dollar (USD), according to the latest technical analysis by FX strategists at Scotiabank.

“GBPUSD’s sharp recovery is notable” says Shaun Osborne, Chief FX Strategist at Scotiabank.

“The RSI’s dip into bearish territory (below 50) has proven to be short-lived, and the focus is now on the 1.29-1.30 congestion range that had prevailed through much of March and the first couple of trading days in April.

“Resistance is expected between 1.31 and 1.32 while support is expected below 1.28.”

The Pound US Dollar exchange rate advanced on Thursday following news that US President Donald Trump would implement a 90-day delay on most tariffs, sparking renewed market optimism.

The Pound (GBP) benefited from improved risk appetite on Thursday. The UK currency—which tends to perform well in risk-on environments—found support amid broad-based market optimism.

Investors reacted positively to Trump’s decision to shelve a sweeping series of new tariffs for 90 days, opting instead to impose a flat 10% levy on all countries aside from China.

The move triggered a rally in global stock markets and, by extension, helped lift the Pound.

Additionally, the decision prompted traders to reassess their interest rate expectations for the Bank of England (BoE). Earlier in the week, a 25-basis-point cut in May was seen as a near certainty, with some even pricing in a larger 50bps move. However, following the tariff news, the probability of a 25bps cut dropped to 78%.

The US Dollar (USD) weakened on Thursday as demand for safe-haven assets declined amid the improving market mood.

Compounding the pressure on USD were lingering doubts about Trump’s economic strategy.

The initial introduction of tariffs had already been criticised for its lack of economic modelling and potential fallout for the US economy.

Now, the abrupt reversal may have dealt another blow to confidence in the White House’s policy direction, further undermining the Dollar.

Looking to Friday, the Pound could climb higher if the UK’s GDP data meets forecasts. Economists expect February to show a modest 0.1% rebound in growth, following a 0.1% decline in January.

Meanwhile, the latest producer price index could affect the US Dollar. While rising PPI figures could support USD by dampening interest rate cut expectations, they could just as quickly stoke recession fears, thereby weighing on the currency.

Furthermore, the latest University of Michigan consumer sentiment index may also influence USD. Analysts anticipate another drop in confidence, which could intensify concerns over the US economic outlook and apply further pressure to the Dollar.

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TAGS: Pound Dollar Forecasts