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

The pound-to-euro forecast is an indication of where technical and fundamental analysts think the GBPEUR price may be in the future. You can use these exchange rate forecasts to help you decide if now is the right time to buy Euros, or if you should wait until the price improves.

GBPEUR Forecast Highlights

• Central banks (BoE/ECB) are eyeing to cut policy rates as inflation tumble
• GBPEUR is trading in a tight range given the monetary synchronicity between Eurozone and UK
• Correction from 1.175 ceilings recently; affirming the range formation

How has the Pound performed against the Euro recently?

To be fair, watching the Sterling-Euro exchange rate these days is, ahem, boring.

There are many other eye-catching moves elsewhere in the market, like the Dollar (strong), gold (new highs) or tech stocks (dazzling rise). Even the good old bonds are trending (lower).

Boring, however, is good. Exporters and importers would have some confidence where the rate will be in the future. For traders, however, the opportunity to make big bucks from trend-following tactics is minimal since the rate doesn’t really trend. GBPEUR has been locked within a tight range (1.165-1.175) for the last ten weeks. Unless mean-reversionary strategies are employed, traders might as well move on to something else, something more ‘trendy’.

But why is the rate so stable? For one, the British and European economies are hardly diverging. Economic factors that are hitting the European economies (eg, high energy prices, subdued consumer spending) are also weighing on the UK too. And both central banks – the ECB and BoE – are holding onto their tight monetary policies.

However as the Eurozone/UK economies struggle and inflation rates tumble, both central banks are waiting to cut interest rates. It is only a matter of time before they do so. In the most recent ECB monetary meeting on the 11 April, the governing council assessed that the ‘risks to economic growth remain tilted to the downside.” How far will the policy rate drop is anyone’s guess.

Against this backdrop, the GBPEUR rate is expected to trend sideways for the time being. The big factor that could alter this equilibrium is a major, sudden change in the economic outlook on one side. For example, in 2022 the UK economic trajectory dramatically deteriorated and caused the rate to crash to 1.080. Nothing of the sort is happening now (touch wood) on either side.

Therefore, I expect the GBPEUR rate to stay in a band between 1.150-1.180.

Is it a good time to buy Euros with Pounds?

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

Summer is just round the corner and if you’re in need of some Euros, now may not be a bad time to secure these Euros with a currency forward. The fx rate GBPEUR is pretty stable and trades near the lower side of the range.

Of course, you may wish to wait further until GBP rebounds. This only works if you can afford to hold on longer. The risk is that Sterling may test the lower side of the band (1.150) due to underperforming GBP day-to-day macro dataflow. Buying on the spot when you need the Euros always carries some risks.

Will the pound get stronger against the Euro in 2024?

Sterling got off 2024 in a bullish manner. By early March, Sterling has outperformed 90 percent of all other currencies.

However, GBP’s strength has contracted sharply in the past few weeks as Sterling bulls booked profits and retreated from long GBP bets. Three factors are continuing to weigh on the currency:

1. High borrowing costs – which is weighing on UK household and corporate cash flows. While the Base Rate is expected to soften this year from 5.25 percent, mortgage costs are still significantly higher than they were 2-3 years ago.
2. Uncertain political landscape – as the country gears up for another general election. What will the new government do? From budgetary concerns to spending issues, the list of questions is endless. Market hates uncertainty and this will weigh on GBP.
3. Stick inflation – which may limit how far the policy rate will go. This means the indebted entities will have to continue service the high borrowing costs.

Taken together, GBP is not in a great macro position to outperform the EUR sharply. A modest rally, perhaps. A sustained bull run, unlikely. Unless, of course, Britain generates a string of GBP positive newsflow, like a sudden improvement in consumer spending, exports, et cetera. Until then, expect GBPEUR to range trade.

Source: Yardeni.com (Apr 2024)

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

GBPEUR is trading in a flat range. But the market is slightly downbeat on the GBP.

If we look at the aggregate forecasts for the rate, GPBEUR, the consensus is that we may see a modest decline of the exchange rate into the 1.150 level, before falling further by the start of 2025. The projection chart below is taken from Exchangerateforecast.org.uk.

The reasoning is perhaps the UK will continue to underperform the Eurozone as a whole, given the number of macro headwinds the UK economy is facing right now.

But these predictions should be viewed with some scepticism given how dynamic the macro situations are at the moment. If, for instance, the economic performance deteriorates more than expected in Europe, that may alter the expected path of the policy rate and the GBPEUR rates.

Chartwise, GBPEUR ranging at the band 1.150-1.180.

Source: Exchangerates.org.uk (Apr 2024)