Pound To Euro Forecast – Is Now The Best Time To Buy Euros From Pounds?

GBPEUR Forecast Highlights

• GBPEUR rallies above 1.200 on modest EUR weakness
• Major resistance at 1.210-1.220 checking the uptrend
• Evenly-matched economic trends (UK/EU) suggest sideways trend

How has the Pound performed against the Euro recently?

While macro news out of the UK has not been positive, since the last update in October GBPEUR has been grinding higher. The GBPEUR exchange rate even broke through the 1.200 resistance (in favour of GBP).

If we look at the bigger picture, the rate is enjoying a modest uptrend since early 2023 (see below). However, this uptrend is now hitting a technical ceiling that was reaffirmed several times back in 2022.

Will the rate crack this barrier this time round? This is a tough ask, since GBP seldom outperformed the Euro in a big way. GBPEUR’s two-year uptrend, while still in play, covers a size magnitude of just 900 pip (0.0001 = 1 pip).

Another aspect of the chart below relates to the relative economic performance of the two regions. We all know the British economic performance isn’t good (IMF estimates real GDP growth of 1.1 percent this year); but the Eurozone  is not growing fast either. Sustained relative outperformance is conspicuously absent here. If we stretch the GBPEUR chart into a weekly one, you can see the length of this sideways movement: 9 years and counting. The rate has been stuck in between 1.100-1.210 since Brexit. Occasionally, the rate lurched downwards when the UK made wild decisions (eg, Truss debacle).

Therefore, unless the Eurozone takes a turn for the worse I expect GBPEUR stay in a messy range for the time being, bouncing around the 1.180-1.220.

Is it a good time to buy Euros with Pounds?

Based on the above analysis, it is a good time to buy Euros now?

If you need the Euros now, you may want to use GBP’s strength to exchange some Euros, when the rate is trading above 1.200. This price band (1.200-1.220) sits at the top of the range historically. So it is a good rate to sell GBP and buy EUR. You can secure these Euros for use in the future with a currency forward.

On the other hand, you can wait further for the rate to appreciate above 1.210. The risk here is that Sterling may unwind its recent gains (to 1.180) after enjoying a good run. Buying on the spot when you need the Euros always carries some risks.

Will the pound get stronger against the Euro in the first quarter of 2025?

A New Year often brings new economic opportunities. For the European continent, however, the same set of challengers linger.

Worries about a spike in inflation have been replaced by fears of compounding negative economic growth. The chart succinctly below captures this widespread gloom and doom. For the past twenty-four months, Europe’s economic sentiment has been stuck below its long-term average (100).

Reasons for this trend are blindingly obvious. High energy costs, high borrowing costs and slowing economies among big European states like Germany are three negative factors battering the region. A large segment of consumers are feeling the chill of recessionary winds blowing through their stagnant budgets. Things are getting more expensive everywhere.

By comparison, the UK economic picture appears relatively calm. Hence the rally in GBPEUR through the 1.200 key level last year.

Looking forward, however, these economic trends are harder to predict. For one, 2025 is set to be a ‘make or break’ year for the continent. Having stuck in a slowing economic wheel going nowhere, the bloc could either a) improve or b) slip downright into a recession. If the former, the Euro may rally modestly from the current level and cause a corrective drop in the GBPEUR. If the latter, watch for GBPEUR to rise (ie, EUR to weaken).

Of course, the third course is ‘muddle through’, which extends the current malaise for another four more quarters. European governments know that option of ‘doing nothing’ is fast expiring. But when leaders tried to introduce something fiscally new – like UK Chancellor’s tax rises – it compound the problem.  Look at France’s budgetary setbacks last year.

Therefore, the European Central Bank has been trying to boost the European economy with persistent rate cuts (eg, four rate cuts in 2024). But there is only so much the bank can do.

In all, GBPEUR is likely to stay around 1.180-1.220 in the near term as both regions are experiencing similar economic headwinds.

Source: Yardeni.com (Jan 2025)

What is the GBPEUR forecast in weeks, months, years?

After a modest rally, what is the market expecting GBPEUR to do in the coming quarters?

According to the range of forecasts tallied by Exchangerateforecast.org.uk, the bulk of these forecasts crowds within the 1.15-1.25 range for the foreseeable future (see below).

The investment community is not expecting a big, one-sided, move from either currency. And historically this hasn’t happened many times too.

But the FX market is inherently volatile due to the dynamic economic trends. The rate reflects these trends. Should either UK/Eurozone performance swing to one side, watch for a sharp move in the rate.

Source: Exchangerates.org.uk (Jan 2025)