Image © Bank of England

Corpay releases forecasts for the GBP/USD and GBP/EUR exchange rates.

The British pound is likely to experience a volatile year, with initial weakness followed by a potential recovery.

This is according to Corpay, the global financial payments firm, which has released its 2025 forecasts for the major currencies.

Karl Schamotta, Chief Market Strategist at Corpay, says the British pound is set for a turbulent 2025 owing to a mix of domestic economic challenges, potential interest rate cuts, and international factors, including U.S. policy changes.

While the start of the year may be difficult, there are factors that could support a recovery later in the year and GBP/USD could breach the 1.30 threshold is possible by year-end.

Initial Weakness

The pound is expected to experience a turbulent start to the year, with a potential for weakness against the dollar amidst a loss of economic momentum

The UK economy slowed sharply over the second half of 2024, leading to softening labour markets, wage pressures, and lower inflation expectations.

Bank of England Rate Cuts: The Bank of England (BoE) is expected to cut interest rates more aggressively than markets anticipate. This will limit the extent to which interest differentials can support the currency against the euro.

“We think the Bank of England will cut rates more aggressively than markets anticipate in the near term, limiting the extent to which interest differentials can support the currency against the euro,” says Schamotta.

Goldman Sachs point forecasts for 2025 are out, showing ongoing resilience for GBP/EUR. But how high can the exchange rate go? Find out more.

Consumer Spending: With Bank Rate projected to fall well below 4%, consumers should experience a substantial improvement in real disposable incomes, adding to an already resilient demand backdrop.

Potential for Dollar Strength: If the US dollar gains in the first quarter, the pound could suffer along with other global currencies, says Corpay. The trade protectionist policies of Donald Trump are widely cited as being a potential source of support to the Dollar in the coming year.

This can put Pound-Dollar under pressure.

Services-Focused Economy: Underpinning Sterling’s resilience is the UK’s services-focused economy. This offers some insulation against a turn toward trade protectionism in the US, especially when compared to goods-dependent countries in the Eurozone.

Fiscal Policy: Corpay says the Labour government’s expansionary fiscal policy is likely to provide a strengthening tailwind to growth as the year progresses.

Potential for Recovery: Despite the initial challenges, Corpay analysis shows the pound can recover as the year progresses. A recovery is expected once markets have more soberly evaluated the likely direction of US policy.

The forecast for the Pound to Dollar pair in the source is 1.27 in Q1, 1.28 in Q2, 1.29 in Q3, and 1.30 in Q4.

“We think the pound could suffer along with its global counterparts if the greenback adds to its recent gains in the first quarter, but expect that a recovery will begin once markets have more soberly evaluated the likely direction of US policy,” says Schamotta.

GBP/USD investment bank consensus forecasts: The end-2024 and 2025 guide from Corpay has been released. It shows a sizeable uplift was made to the consensus forecasts for GBP/USD. Please request a copy here.

Possible Euro to Pound Scenarios

Early 2025: The Euro may initially struggle against the Pound due to the Eurozone’s economic issues and the anticipated European Central Bank (ECB) rate cuts.

However, the Pound is also facing its own headwinds, meaning there may not be a decisive move in either direction initially.

Mid- to Late-2025: As the year progresses, the Pound’s recovery, driven by fiscal policy and potential consumer spending increases, could see it outperform the Euro.

However, a Eurozone recovery based on increased spending and investments could counter this.

The derived EUR/GBP forecast from Corpay suggests a gradual appreciation of the Euro against the Pound throughout 2025:

Q1 2025: The EUR/GBP rate is approximately 0.8190.

Q2 2025: The EUR/GBP rate is approximately 0.8200.

Q3 2025: The EUR/GBP rate is approximately 0.8220.

Q4 2025: The EUR/GBP rate is approximately 0.8230.

Based on this calculation, the derived GBP/EUR forecast suggests a gradual depreciation of the Pound against the Euro throughout 2025:

Q1 2025: The GBP/EUR rate is approximately 1.2210.

Q2 2025: The GBP/EUR rate is approximately 1.2200.

Q3 2025: The GBP/EUR rate is approximately 1.2170.

Q4 2025: The GBP/EUR rate is approximately 1.2150.

Important DisclaimersThe content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party’s services, and does not assume responsibility for your use of any such third party’s website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.Risk DisclaimersThis website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.

December 31, 2024 – Written by Frank Davies

STORY LINK US Dollar to Yen Forecast: Clash of Economics and Politics, 140 or 160 in 12 months

The latest monetary policy statements triggered dollar gains and yen losses, with the dollar-to-yen (USD/JPY) exchange rate jumping to five-month highs near 158.

The Pound to Yen (GBP/JPY) exchange rate is trading around 197.

Monetary policies will remain a key element during 2025, although geo-political developments will also have a key impact as the Trump Administration takes office.

HSBC expects a firm dollar tone will dominate; “our view is that it will resume rising when the broad USD breaks out of its consolidation and starts to strengthen again.”

It has an end-2025 USD/JPY forecast of 160. It also expects GBP/JPY to hold at 197 by the end of next year.

Danske Bank expects further Fed interest rate cuts will be the dominant factor with USD/JPY sliding to 140 at the end of 2025.

It forecasts GBP/JPY will post sharp losses to 171 by the end of 2025.

The Bank of Japan made no changes to monetary policy at the December meeting with interest rates held at 0.25%.

MUFG commented; “More importantly, Governor Ueda refrained from sending a strong signal that the BoJ is planning to hike rates at the next policy meeting on 24th January. He only added that there will be a certain amount of information available by the next meeting while emphasizing that the full picture on the wage trend will be clear in March or April.”

According to Bank of America; “Looking ahead, we remain comfortable with our forecast that the BoJ will deliver its next hike, to 0.5% at the January ’25 MPM, followed by two more 25bp hikes to 0.75% in July ’25 and 1% in January ’26.”

It added; “As the US presidential inauguration day comes a few days ahead of the BoJ’s Jan MPM, a hike at the Jan MPM is not a done deal.

MUFG added; “It has provided a green light for speculators to rebuild short yen positions and increases the likelihood that USD/JPY will rise back up toward year to date highs at just above the 160.00-level.”

The Federal Reserve cut interest rates by 25 basis points to 4.50%, but there was a significant shift in forecasts with committee members now only projecting two rate cuts for 2025 compared with four in the September set of forecasts.

Fed Chair Powell’s rhetoric was also relatively hawkish with comments that the pace of rate cuts could slow.

ING commented; “Our forecast profile of a higher USD/JPY is largely down to the fact that we expect the US 10yr Treasury to end 2025 at 5.50%.”

In contrast, Danske Bank expects a firm yen tone; “We believe the Fed is likely to cut rates more aggressively than markets currently anticipate in 2025, which could push the pair lower.”

Dollar and wider currency policies will be potentially very important.

ING commented; “There is some talk of a ‘Mar-a-Lago accord’ to weaken the US dollar. We think Trump’s policies are dollar positive, but if Washington’s dollar policy were to make an impact, especially if US growth disappoints, we suspect USD/JPY would lead $ lower.

There will also be pressure for Bank of Japan intervention to support the yen if there is excessive weakness.

At this stage it has an end-2025 forecast of 160.

ING also forecasts GBP/JPY at 198 at the end of 2025.

Like this piece? Please share with your friends and colleagues:

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: Japanese Yen Forecasts

Created on December 31, 2024

• The British pound has initially tried to rally during the trading session on Monday, but as you can see, the 1.26 level has offered a significant amount of resistance. And then we turned around and fell hard.
• The 1.25 level is an area that continues to see a lot of support.
• It’s a large round, psychologically significant figure, and an area that’s been important times.

The question now is what happens next because we are at a major inflection point. If the market were to break down below the 1.25 level, then you could see a drop to the 1.23 level pretty quickly. The US dollar is by far the strongest currency of the majors around the world and with interest rates in America being so high it makes quite a bit of sense. With this I think you’ve got a situation where you continue to look at rallies as selling opportunities. Now, having said that, the British pound is faring better against the US dollar than many other currencies.

British Pound Decent Overall, but not Here.

So, you can also take this and use this as part of your analysis to perhaps buy the British pound against the Australian dollar, which is doing so much worse. It isn’t necessarily that the British pound is going to go flying. It’s just that it’s doing better than these other currencies. As far as against the US dollar is concerned, the 1.2750 level above will continue to be a significant barrier. It’s not until we break above there that I think the market really has a significant chance to take off to the upside. And it’s probably worth noting that the 1.2750 level is also backed up by the 50-day EMA as well as the 200-day EMA. I remain a fade the rallies trader in this market.

Ready to trade our GBP/USD Forex analysis? Check out the best forex trading company in UK worth using. 

Created on December 31, 2024

• We initially tried to rally a bit and recover, but I think it’s obvious that the only currency that you want to own as far as the majors will be the US dollar.
• Interest rates continue to favor the US dollar as they are going higher, despite the fact that the Federal Reserve has been cutting.
• This isn’t normal, and therefore it is something that must be paid close attention to.

Furthermore, you also have to keep in mind that the ECB is going to have to cut rates, and the European Union economy is just poor. EUR/USD is a market that I think continues to consolidate between the 1.03 level and the 1.06 level. Any rally that leads towards the 1.06 level I would look at with suspicion, I would not hesitate to start shorting it at the first signs of exhaustion. It looks like that’s what traders did during the session on Monday.

Liquidity and Volume During this Time of the Year

Now, having said all of that, we do have to worry about liquidity, and that might have made the move in both directions a little overdone as far as the reality of it is concerned. But it is still a market that I do not want to get long in. I want to short this market, and we need to break above the 1.06 level to even have the conversation of going long the euro. I don’t want to play the bounce because there’s no reason for this thing to stay up here from a fundamental standpoint at the moment. You can’t just buy something because it’s fallen too far. That’s a great way to lose money. If we clear 1.03 to the downside, we’re going to parity. And that is what I expect to see sometime in 2025.

Ready to trade our Forex EUR/USD daily forecast? We’ve shortlisted the best forex broker list for you to check out.