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The Euro to Dollar (EUR/USD) exchange rate proved resilient early this week amid elevated uncertainty and jumped to highs just above 1.17 on Wednesday following the announcement of a 2-week cease-fire between the US and Iran.

CIBC expects a net EUR/USD advance to 1.19 by the end of this year as the dollar loses traction amid lower US yields.

Inevitably there is still a high degree of uncertainty over the Middle East situation and whether there will be a durable easing of tensions and a resumption of shipping through the Strait of Hormuz.

The bank notes the potential for fresh dollar gains if the Iran situation deteriorates again, but also considers that the US currency is overvalued at current levels.

Importantly, CIBC considers that the economic impact already seen will reinforce its expectations that yields will move in favour of European currencies during the course of this year.

The bank expects that the ECB will be more willing to raise interest rates to combat any second-round inflation effects. In contrast, it does not expect the Federal Reserve will hike rates and, at this stage, is still backing two rate cuts by the end of this year.

– Written by


Ben Hughes

STORY LINK Pound Sterling to Dollar Forecast: GBP’s “Sentiment-driven Gains” see 1% Rally

The Pound to Dollar exchange rate (GBP/USD) surged above 1.3400 after a ceasefire agreement in the US-Iran conflict triggered a sharp drop in oil prices and a rebound in global risk appetite.

While the weaker dollar has boosted Sterling in the short term, analysts warn that uncertainty remains high and gains could face resistance near the 1.35 level.

GBP/USD Forecasts: Jump Above 1.3400

The Pound to Dollar (GBP/USD) exchange rate jumped above the 1.3400 level in Asia on Wednesday following the announcement of a ceasefire in the US-Iran conflict.

Just ahead of President Trump’s deadline, a deal brokered by Pakistan secured a 2-week ceasefire. In return, Iran pledged to allow transit to resume through the Strait of Hormuz.

Oil prices dropped sharply and there was a surge in risk appetite with a 2.0% gain for the FTSE 100 index while the dollar posted sharp losses with the dollar index (DXY) around 98.80 from close to 100 on Tuesday.

A dip in energy prices and a decline in bond yields will alleviate pressure on the UK economy, although both metrics are worse than before the conflict started.

UoB commented; “While the short-term rally appears overdone, there is scope for GBP to rise to 1.3480.” There is also likely to be tough resistance on any approach to the 1.3500 area.

ING noted the importance of energy prices; “Risk assets are rallying as combatants in Iran pull back from the brink. The most impactful news overnight has been Iran’s announcement that it will allow safe passage for traffic through the Strait of Hormuz during this ceasefire.”

MUFG commented; “There are a lot of uncertainties that will persist but having said that, this of course is a step in the right direction and we see this as reducing considerably, over the short-term at least, the risk of a major risk-off and with it a strengthening of the dollar.

It added; “This outcome is a clear bearish outcome for the US dollar.”

According to National Australia Bank head of FX strategy Ray Attrill; “If the strategic waterway is reopened, we could be able to consolidate the risk-on rally that we’re seeing.”

He added; “But a lot has to happen in the next 14 days. Markets still need to proceed with a degree of scepticism.”

ING commented on the dollar; DXY rallied just over 3% through March. It has gapped lower today, and a further sell-off to 98.50 looks possible. However, there remains too much uncertainty to expect a full unwind of the March rally, and it is therefore premature to call for a break under 98.00.”

Rabobank noted the wide range of potential outcomes; “In terms of our macro and market scenarios, the latest news leans towards our base case of fighting being over by mid-April with a slow Hormuz reopening – and on US terms. Obviously, if this pause instead leads to more fighting, we move towards our other, more damaging scenarios.”

ING added; “Don’t expect a complete reversal of March trends, however.”

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TAGS: Pound Dollar Forecasts

The EURJPY pair renewed the positive attempts since yesterday, due to the continuation of providing positive momentum by the main indicators by its rally above the initial resistance at 184.80, to test the barrier at 185.45 to bounce directly to settle near 184.90.

The price might be forced to provide mixed trading by its stability below 184.45, and there is a chance for forming bearish waves to target 184.20 and 183.70 level, while its success to surpass the barrier at 185.45 will open the way for forming strong bullish waves, to expect reaching 186.00 initially, reaching 186.65.

The expected trading range for today is between 184.40 and 185.45

Trend forecast: Fluctuated

The EURJPY pair renewed the positive attempts since yesterday, due to the continuation of providing positive momentum by the main indicators by its rally above the initial resistance at 184.80, to test the barrier at 185.45 to bounce directly to settle near 184.90.

The price might be forced to provide mixed trading by its stability below 184.45, and there is a chance for forming bearish waves to target 184.20 and 183.70 level, while its success to surpass the barrier at 185.45 will open the way for forming strong bullish waves, to expect reaching 186.00 initially, reaching 186.65.

The expected trading range for today is between 184.40 and 185.45

Trend forecast: Fluctuated

– Written by


David Woodsmith

STORY LINK Pound-to-Euro Week Ahead Forecast: Best GBP Levels in Play

The Pound to Euro exchange rate (GBP/EUR) climbed above 1.1550 to one-month highs as shifting Bank of England rate expectations and position adjustments supported Sterling despite heightened geopolitical tensions.

Rising energy prices following escalating conflict in the Middle East have complicated central-bank policy expectations, prompting markets to reconsider the timing of Bank of England rate cuts while the Euro faces pressure from Europe’s dependence on energy imports.

GBP/EUR Forecasts: BoE rethink?

After initial vulnerability, UBS expects that the Pound to Euro (GBP/EUR) exchange rate will strengthen to 1.1630 by the first quarter of 2027.

MUFG, in contrast, still forecasts that GBP/EUR will slide to 1.11 by the end of 2026.

Middle East developments dominated during the week with a surge in energy prices as the US and Israel attacked Iran aggressively while Iran retaliated with missile strikes across the region.

GBP/EUR was broadly resilient and a break above 1.1500 triggered a 1-month high above 1.1550. There was clear evidence of position adjustment with a covering of short Pound positions while the Euro was hit by a liquidation of long positions.

A shift in Bank of England expectations also underpinned the Pound with expectations that the Bank of England would decide not to cut rates this month due to elevated uncertainty.

Nomura has been notably bearish on the Pound, but has tempered its short-term view; “The risk now is that the market finds it relatively easy to price out BoE rate cuts, but the hurdle to pricing in meaningful rate hikes in the euro area is higher. Indeed, the two-year swap spread has moved from just under 120bp in GBP’s favour to nearly 130bp in the last few days.”

It noted; “This has overwhelmed any potential relative “safe haven” demand for EUR relative to GBP, which is often seen when global equities are under pressure.”

The bank added; “if energy prices stay elevated. In the short term, EUR may face slightly more pressure than GBP from these forces.”

UBS has a positive medium-term Pound outlook; “We expect the pound to recover in the second half of this year and into 2027—especially given its current undervaluation—as the political landscape becomes clearer after the May elections and the BoE nears the end of its easing cycle.”

Natixis sees the risk of near-term Pound selling; “In the short term, EUR/GBP could move back above 0.88 (GBP/EUR below 1.1360), especially ahead of the local elections on May 7, which risk adding another layer of political uncertainty.”

UBS does have reservations over the near-term Pound outlook; “With local and regional elections scheduled for May and monetary easing likely to continue through to June, we don’t expect sterling to outperform in the near term. Meanwhile, Europe’s recovery is gaining momentum, with increased fiscal spending in defense-related sectors starting to show.”

MUFG expects rate cuts will be delayed rather than cancelled; “We assume the BoE will hold off from a cut this month due to higher energy prices stemming from Middle East risks, before delivering two further cuts in Q2 and Q3.”

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TAGS: Pound Euro Forecasts