ExchangeRates.org.uk - The Pound to Euro exchange rate (GBP/EUR) traded close to 32-month highs just below the 1.2100 level this week. Wells Fargo (NYSE:WFC) expects that dollar strength will dominate during 2025 with the Euro to Dollar (EUR/USD) exchange rate sliding below parity.
It expects Euro weakness will drive GBP/EUR gains to 1.2540 by the end of 2025 which would be the strongest level since 2016.
Wells Fargo considers that weakness in the Euro-Zone will be exacerbated by the imposition of trade tariffs on the Euro area by the Trump Administration.
It considers that the Euro is one of the currencies likely to under-perform next year.
In this environment, it expects that the ECB will cut interest rates faster and further than expected previously.
It expects that the key Euro rate will be slashed to 1.75% at the end of 2025.
In contrast, it expects that the Bank of England will maintain a relatively cautious stance with UK rates at 3.75% by the end of next year.
Wells Fargo expects that widening yield spreads will boost the Pound.
Sterling gains could be limited by a wider deterioration in risk conditions if the US tariff threat damages confidence in the global economy.
This content was originally published on ExchangeRates.org.uk