Navigating the dynamic and complex world of currency trading, especially within the EUR/GBP pair, requires a deep dive into economic trends, monetary policy shifts, and geopolitical events. This FXOpen article aims to unravel these intricacies, offering insights into the recent performance and future outlook of the euro against the pound sterling.

Recent Performance of the EUR/GBP Pair

The EUR/GBP exchange rate has experienced strong volatility since the UK decided to leave the European Union in June 2016, causing the pound to fall sharply against the euro. EUR/GBP surged from 0.737 at 2016’s open to a high of 0.93 in October of the same year.

Between 2017 and 2019, the pair ranged between 0.831 and 0.932, reflecting ongoing Brexit negotiations and political uncertainty within the UK and the EU.

However, the official departure of the UK from the EU in January 2020 marked a pivotal moment, with markets forced to contend with this new reality.

Throughout 2020, the COVID-19 pandemic further exacerbated these economic uncertainties. The euro initially strengthened against the pound as investors rushed to the relative safety of the euro, spiking from a low of 0.828 in February 2020 to a high of 0.949 in March before declining. By the end of 2020, the EUR/GBP was priced at 0.893.

2021 was characterised by the economic recovery post-pandemic, with both regions implementing fiscal stimulus measures. The pace of recovery, however, was uneven, as vaccine rollouts and reopening plans varied significantly between the UK and the Eurozone. These disparities led to fluctuations in the EUR/GBP exchange rate, but with a stronger pound ultimately leading the pair to conclude 2021 at 0.84.

While the return of economic activity and the UK's efforts to establish new trade relations outside the EU influenced the EUR/GBP pair in 2022, inflation and interest rates took centre stage. Inflation in the UK and EU stood at 5.5% and 5.1%, respectively, in January 2022, with inflationary pressures exacerbated by the start of the Russia-Ukraine conflict in February.  

Interest rates began to rise in both regions, with the Bank of England (BoE) beginning its hiking cycle in December 2021 and the European Central Bank (ECB) waiting until July 2022 to raise rates. Concerns about economic growth and soaring energy costs in the UK ultimately led to the euro strengthening against the pound in 2022. After the UK’s mini-budget fiasco in September 2022, the pair reached a peak of 0.923 before closing the year at 0.884.

Geopolitical tensions, particularly the conflict in Ukraine and its impact on energy prices and supply chains, further influenced the sterling vs euro exchange rate in 2023. Both central banks paused rate hikes after September and October, respectively. The pair closed out 2023 at 0.854, currently priced at 0.857 as of March 2024.

British and European Economic Outlook for 2024

The British and European economic landscapes present a nuanced picture for 2024, shaped by varied forecasts and monetary policy anticipations.

In the UK, the economic outlook for 2024 is considered cautiously optimistic. According to the S&P Global Ratings, the BoE will embark on a path of monetary easing starting in August, as inflation shows signs of cooling and the labour market maintains its resilience. This shift in monetary policy is anticipated to spur investment and potentially add about 2 percentage points to economic activity, with the most significant impact expected in subsequent years.

The UK's GDP, however, faces underlying challenges, as evidenced by a contraction in Q4 2023, reflecting broader economic headwinds despite a modest reduction in unemployment rates to 3.8%. Nonetheless, the resilient labour market and improving consumer purchasing power, thanks to lower energy bills, are seen as supportive elements for a recovery in consumption.

Across the Channel, the Eurozone's growth outlook for 2024 is modest, with GDP growth consensus at 0.5%. This contrasts with a more robust 2.1% growth rate expected in the US. The ECB is projected to cut rates three times starting in June, a move aimed at reinforcing economic activity amidst sluggish productivity and prolonged high wage growth.

Despite these rate cuts, the growth rebound in the Eurozone is anticipated to be weaker than previously expected, partly due to uncertainty over productivity trends and slow implementation of the Next Generation EU recovery package.

S&P Global Ratings slightly adjusted Eurozone inflation forecasts for 2025 upwards, reflecting these economic pressures. While some sources suggest cautious optimism about activity improvement and employment growth moderation, analysts acknowledge that the rebound in growth may not meet earlier expectations.

Analytical Euro to Pound Sterling Forecasts for 2024

Euro to British pound predictions for 2024 see the currency pair's movements significantly influenced by the differing economic outlooks of the Eurozone and the United Kingdom.

Analysts see the ECB’s decision to cut rates starting in June as a pivotal factor that could initially place downward pressure on the euro. Concerns also remain around the Eurozone’s productivity and growth issues.

However, the anticipated moderate recovery in the Eurozone, coupled with a potential gradual improvement in economic activity following the ECB's accommodative stance, might provide some support to the euro later in the year. Consensus leans towards three to four 25 basis points (bps) rate cuts in 2024.

The UK's economic scenario suggests a more resilient outlook, supported by a recovering labour market and anticipated rate cuts to spur investment and consumption. However, the BoE’s shift towards a more accommodative monetary policy, a tighter fiscal backdrop, and upcoming elections introduce a counterbalancing force. Markets currently price in three 25 bps rate cuts from the BoE this year.

Analysts believe that while both currencies are set to face downward pressures from their respective central banks' policies, the relative speed and extent of economic recovery in the UK and the Eurozone will play a crucial role in determining the EUR/GBP exchange rate.

Ultimately, most favour the Eurozone's recovery prospects and the ECB's policy adjustments over the UK's. While both currencies face headwinds, the consensus points towards a slight strengthening of the euro against the pound sterling in 2024.

Note: these are close prices at the end of the quarter. The ExchangeRates source provides average quarterly prices.

EUR to GBP Forecasts for 2024

Bank-Based

Q1 2024:

• Most Bullish Bank Projection: 0.86 (Danske Bank and ING)
• Most Bearish Bank Projection: 0.85 (Royal Bank of Canada and Monex)
  

Q2 2024:

• Most Bullish Bank Projection: 0.87 (Danske Bank and ING)
• Most Bearish Bank Projection: 0.85 (Royal Bank of Canada and Monex)
  

Q3 2024:

• Most Bullish Bank Projection: 0.88 (ING)
• Most Bearish Bank Projection: 0.86 (Royal Bank of Canada and Monex)
  

Q4 2024:

• Most Bullish Bank Projection: 0.88 (Danske Bank and ING)
• Most Bearish Bank Projection: 0.86 (Monex and BNP Paribas)
  

Note: Monex isn’t a bank but a key commercial foreign exchange player.

Algorithm-Based

Q1 2024:

• Most Bullish Algorithm-Based Projection: 0.861 (Wallet Investor)
• Most Bearish Algorithm-Based Projection: 0.823 (ExchangeRates)
  

Q2 2024:

• Most Bullish Algorithm-Based Projection: 0.862 (Gov.Capital and ExchangeRates)
• Most Bearish Algorithm-Based Projection: 0.845 (Long Forecast)
  

Q3 2024:

• Most Bullish Algorithm-Based Projection: 0.874 (Gov.Capital)
• Most Bearish Algorithm-Based Projection: 0.845 (Long Forecast)
  

Q4 2024:

• Most Bullish Algorithm-Based Projection: 0.871 (Gov.Capital)
• Most Bearish Algorithm-Based Projection: 0.849 (Wallet Investor)

Analytical Euro to Pound Sterling Predictions for 2025 and Beyond

Looking towards 2025 and beyond, the trajectory of the EUR/GBP exchange rate is expected to be influenced by the long-term economic and monetary policy outlooks of both the Eurozone and the United Kingdom. Analysts anticipate a complex interplay of factors that could shape the future of this currency pair.

In the Eurozone, the ECB's approach to monetary policy, particularly the potential bottoming out of interest rates at a higher level than previously expected, suggests a cautious yet stabilising economic environment. This might lend some support to the euro, particularly as inflation pressures are managed, and long-term growth prospects gradually improve, albeit at a somewhat restricted pace.

In the UK, the focus shifts towards the long-term impacts of monetary policy easing and the anticipated rebound in investment and productivity. Economic activity is expected to gain momentum, supported by improving consumer purchasing power and a strong labour market. However, the full effects of policy measures on investment and productivity are likely to unfold over several years, with a significant impact projected for 2026 and 2027.

These dynamics reflect a potentially nuanced picture for EUR/GBP, with structural economic factors and policy directions playing a critical role. While near-term forecasts see a slight strengthening of the euro against the pound, the long-term outlook is less certain, with both currencies facing challenges and opportunities that could influence their relative strength. To take advantage of changes in the EUR/GBP interest rate, head over to the TickTrader platform.

EUR/GBP Forecasts for 2025

Q1 2025:

• Most Bullish Projection: 0.89 (Royal Bank of Canada)
• Most Bearish Projection: 0.833 (Long Forecast)
  

Q2 2025:

• Most Bullish Projection: 0.91 (Royal Bank of Canada)
• Most Bearish Projection: 0.827 (Long Forecast)
  

Q3 2025:

• Most Bullish Projection: 0.93 (Royal Bank of Canada)
• Most Bearish Projection: 0.834 (Long Forecast)
  

Q4 2025:

• Most Bullish Projection: 0.94 (Royal Bank of Canada)
• Most Bearish Projection: 0.85 (Long Forecast)

EUR/GBP Forecasts for 2026

EUR/GBP Forecasts for 2027

EUR/GBP Forecasts for 2028

Wallet Investor sees EUR/GBP at 0.829 mid-year 2028 and 0.835 for the end of the year.

General Factors Influencing the EUR/GBP Pair

The EUR/GBP exchange rate is influenced by a myriad of factors that can drive its fluctuations. Below are key idiosyncratic factors that specifically impact this currency pair:

• Monetary Policy Decisions: The ECB and BoE’s interest rate decisions directly impact the EUR/GBP pair, as differences in monetary policy can alter investment flows between the Eurozone and the UK.
• Economic Growth Projections: Disparities in GDP growth rates between the two economies can sway the exchange rate, with stronger economic performance typically bolstering a currency's value.
• Political Stability and Policy: Events such as elections, Brexit-related developments, and fiscal policy changes can introduce volatility into the EUR/GBP exchange rate.
• Inflation Rates: Inflation disparities can influence the pair, as higher inflation in one region may lead to expectations of tighter monetary policy, strengthening the respective currency.
• Trade Balances: The balance of trade between the Eurozone and the UK affects currency value, with a higher trade surplus typically supporting a currency's strength.
• Global Market Sentiment: As both currencies are considered relatively safe compared to others, global risk sentiment can drive investors towards or away from the EUR and GBP, depending on the context. Previous crises, like the onset of COVID-19 and the 2008 crash, saw the euro appreciate against the pound, while the Eurozone crisis prompted the opposite.

The Bottom Line

From the volatility sparked by Brexit to the impacts of the COVID-19 pandemic and varying recovery paths, the EUR/GBP exchange rate has been subject to significant fluctuations. As we peer into 2024 and beyond, understanding the interplay between the Eurozone and UK's economic policies, inflation rates, and growth prospects becomes crucial for traders.

For those looking to navigate these waters with confidence, opening an FXOpen account provides the tools and insights necessary for informed trading decisions in this ever-evolving market.

FAQs

What Is the GBP/EUR Forecast for 2024?

Analytical British pound-to-euro predictions for 2024 indicate a slight strengthening of the euro against the pound, influenced by monetary policy adjustments and economic recovery efforts within the Eurozone and the UK.

Will the Pound Get Stronger in 2024?

The pound's strength in 2024 is expected to be challenged by the UK's economic conditions and monetary policy easing. While the pound may see moments of resilience, analysts assume it might not significantly strengthen against the euro.

Is the Pound Getting Stronger Against the Euro?

As of the latest pound-to-euro forecasts, the pound is not expected to get substantially stronger against the euro in 2024. The EUR/GBP rate is anticipated to show a slight preference for the euro, reflecting economic and policy dynamics.

Why Is the British Pound So Strong?

The British pound's strength historically stems from the UK's economic stability, political influence, and its role as a global financial centre. However, fluctuations occur due to economic indicators, monetary policy, and geopolitical events.

Is It a Good Time to Buy Euros?

Given the predictions of a slight rise in the EUR/GBP exchange rate, purchasing euros now might be advantageous for those expecting the pound to weaken against the euro. However, market conditions can rapidly change, and such decisions should be based on current analysis and personal financial considerations.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.