**2025 Forecast: Pound Sterling to Hold Below Euro Resistance, Advance on Dollar**
*Original reporting by Tim Clayton, CurrencyNews.co.uk*
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The year 2025 is shaping up to be a period of significant tests for the British Pound (GBP), as global economic trends, the policies of central banks, and evolving geopolitical events look set to direct the currency’s path. Throughout 2024, the Pound’s resilience has been tried repeatedly; yet, its medium-term outlook reveals both persistent challenges and emerging opportunities, particularly in major currency pairings such as GBP/EUR and GBP/USD.
This comprehensive analysis outlines the key forecasts for Pound Sterling in 2025, focusing on its performance against the Euro (EUR) and the United States Dollar (USD). Drawing on expert views and currency trends, we explore the underlying forces at play, highlighting the technical and fundamental factors that will shape GBP exchange rates.
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## Sterling’s Underlying Fundamentals
### Economic Outlook
The UK’s economic prospects are mixed as 2025 approaches. After a period of sluggish growth and elevated inflation levels in 2023-2024, forecasts expect modest recovery.
* **GDP Growth:** The UK is anticipated to post modest GDP growth in 2025, likely between 1 and 1.5 percent.
* **Inflation Trends:** 2025 should see inflation stabilising, as the Bank of England’s previous tightening measures filter through.
* **Labour Market:** While unemployment rates are expected to remain low, wage pressures could linger, potentially affecting consumer confidence and spending.
* **Business Investment:** With greater clarity on UK political leadership and fiscal policy after the 2024 general election, business investment is a potential growth driver.
### Monetary Policy
Bank of England (BoE) policy is poised to play a central role in determining the Pound’s trajectory. Most analysts anticipate:
– **Gradual rate cuts** as inflation falls, but the pace will depend on persistent wage growth and service-sector prices.
– **Interest rate differentials** with the US Federal Reserve and the European Central Bank (ECB) will continue to influence GBP’s relative value.
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## Technical Analysis: Key Sterling Levels
The Sterling faces significant technical levels in its major pairings.
### GBP/EUR Exchange Rate
By mid-2024, the Pound had tested resistance levels near 1.1750 against the Euro but failed to decisively break and hold above this threshold.
* **Key Resistance:** 1.1750
* **Key Support:** 1.1500
Currency strategists expect the GBP/EUR to trade within a relatively narrow range, holding below major resistance for much of 2025.
### GBP/USD Exchange Rate
After spending significant time around the 1.25-1.28 corridor in 2024, the GBP/USD pair appears set for potential advances—assuming relative UK outperformance or dovish Fed policy.
* **Key Resistance:** 1.3000
* **Key Support:** 1.2500
Technical momentum favors slow gains if (and only if) the UK outlook noticeably improves relative to the US.
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## Principal Drivers of Sterling Direction in 2025
Several fundamental drivers will determine whether the Pound can overcome resistance or cede ground:
### 1. Divergence in Central Bank Policy
– If the BoE cuts rates less aggressively than the Fed or ECB, the Pound could see relative strength.
– Conversely, if UK growth disappoints and forces deeper rate cuts, Sterling could retreat.
– Markets will closely watch forward guidance from all three central banks.
### 2. Fiscal Policy and Political Uncertainty
– The outcome of the 2024 UK general election introduced greater policy certainty, but further clarity on tax and spending will be watched by investors.
– Market confidence will depend on how the new government approaches public spending, debt reduction, and investment incentives.
### 3. Eurozone Growth and Risks
– Comparative weakness in Eurozone growth would
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