Forecasts for GBP to EUR
The recent GBP to EUR exchange rate forecasts are largely overshadowed by dynamic macroeconomic factors affecting both currencies. As of now, the GBP is trading at 1.1525, which is 3.4% below its three-month average of 1.1925, placing it within a stable range between 1.1517 and 1.2127. Analysts note that the pound has faced significant downward pressure, particularly following the announcement of a 10% tariff on UK imports by U.S. President Donald Trump amidst escalating trade tensions. This has raised concerns about the UK economy's ability to cope with rising borrowing costs, with yields on 30-year government bonds reaching their highest levels since 1998.
Economists warn that if UK government borrowing costs continue to rise, the pound may face further declines, particularly given the lack of crucial economic data to provide support. The market sentiment toward GBP remains cautious, heavily influenced by domestic economic performance, ongoing political instability, and the Bank of England’s future monetary policy decisions. Short-term fluctuations can also be expected as political developments, especially those related to post-Brexit trade agreements, unfold.
In contrast, the euro (EUR) has shown signs of strength recently, buoyed by a coalition agreement between Germany's CDU and SPD, which brings a semblance of political stability to the Eurozone’s largest economy. The euro is positively correlated with a decline in the US dollar demand and could maintain its upward trajectory if safe-haven assets remain favored by investors. Current trading shows that EUR is benefiting from these internal developments, but it is simultaneously impacted by external geopolitical factors, notably the ongoing war in Ukraine, which poses risks to economic recovery across the Eurozone.
Furthermore, recent trends in oil prices, with crude trading at 64.76, 12.2% below its three-month average of 73.75 and experiencing a wide 33.4% trading range, may also impact both GBP and EUR. Fluctuations in oil prices can lead to changes in inflation and trade balances for both the UK and Eurozone, influencing currency valuations.
Looking ahead, forecasters suggest that the trajectory of GBP will depend significantly on the UK’s economic recovery, ongoing developments regarding fiscal policies, and trade negotiations. Meanwhile, the euro's outlook hinges on the European Central Bank's monetary policy, economic recovery within the Eurozone, and any further geopolitical tensions. Hence, market participants should remain informed on these influencing factors, as they could provide essential insights into future currency movements.
