Will the Euro Get Stronger Against the Pound?

Quick Guide

The Current State of EUR/GBP
How ECB Policy Could Push the Euro Higher
The UK's Economic Headwinds
What the Charts Are Saying
Scenarios for EUR/GBP in 2025
How to Trade or Hedge
FAQ

I’ve been tracking currency pairs for over a decade, and the EUR/GBP cross has always been a fascinating one. Right now, everyone’s asking: will the Euro get stronger against the Pound? Short answer – I lean towards yes, but the road is bumpy. Let me walk you through why.

The Current State of EUR/GBP

As I’m writing this, the pair is hovering around 0.85–0.86. That’s actually quite low historically – back in 2015 we were near 0.70, and post-Brexit vote we shot above 0.90. So we’re kind of in the middle, but the trend since late 2022 has been slowly upward (euro strengthening).

Key Factors Dragging the Pound Down

I’ve been digging into the data, and three things stand out:

Sticky UK inflation: The Bank of England has been hiking aggressively, but inflation is proving stubborn – services inflation especially. That’s not great for growth, and markets hate stagflation vibes.
Brexit trade friction: I remember talking to a logistics guy in Dover last year; he said paperwork delays are still 30% worse than pre-2019. Exports to the EU haven’t recovered, and that’s a structural drag on the pound.
Fiscal uncertainty: The UK’s debt-to-GDP ratio is higher than Germany’s, and investors are nervous about the next budget.

Why the Euro Might Have an Edge

On the flip side, the Eurozone is far from perfect – Germany’s manufacturing is in a funk – but the European Central Bank (ECB) has been more measured. They didn’t hike as fast as the BoE, so the economy hasn’t taken as much of a hit. Plus, energy prices have stabilised, and the EU’s recovery fund is actually spending money on infrastructure. That’s a long-term plus for the euro.

How ECB Policy Could Push the Euro Higher

Let's talk about central bank moves, because that's what really drives exchange rates in the short to medium term.

Interest Rate Differentials

Right now, the ECB’s deposit rate is 4.0%, while the BoE’s base rate is 5.25%. That gap of 1.25% is big, but the market expects the BoE to cut more than the ECB in 2025. If that happens, the rate differential narrows, and that’s bullish for the euro. I’ve seen this play out in 2017 when the ECB started tapering – the euro rallied hard.

Quantitative Tightening vs. Quantitative Easing

A less talked about factor is balance sheet runoff. The ECB is slowly reducing its bond holdings, but the pace is gentler than the BoE’s. The BoE is letting gilts roll off faster, which tightens liquidity and can hurt the pound. I think this technical detail gets overlooked, but it matters a lot.

My take: The ECB is likely to hold rates steady longer than markets expect. That gives the euro a yield advantage that isn't fully priced in yet.

The UK's Economic Headwinds: A Closer Look

I spent a week in London recently, and the mood on the street is cautious. People aren't spending like they used to. That’s showing up in the GDP numbers – the UK grew only 0.1% in Q2 2024. Compare that to the Eurozone’s 0.3%, and you see the divergence.

Inflation and the Cost of Living Crisis

UK wage growth is still high, but real wages are barely positive. And the housing market? Rents in London are up 12% year-on-year. That eats into disposable income, which means less demand for imports – but paradoxically, a weaker pound is supposed to help exports. Except exports aren’t picking up because of Brexit red tape. So the pound gets no support from either side.

Brexit’s Lingering Effects on Trade

I spoke to a small exporter in Yorkshire who said they’ve lost 40% of their EU business because of customs checks. That’s not a one-off – the Office for Budget Responsibility estimates UK trade intensity is 15% lower than if Brexit hadn’t happened. For the pound to strengthen, trade needs to flow. Right now, it’s clogged.

What the Charts Are Saying: Technical Analysis

I’m a big believer in letting the market tell you what’s likely. Let’s look at the EUR/GBP chart.

Support and Resistance Levels

The pair has been in a broad range since 2022: support at 0.84, resistance at 0.89. We’ve tested 0.84 three times and bounced each time. That’s a strong base. On the upside, 0.87 is a minor level, but if we break above 0.89, the next target is 0.95 (the post-referendum high).

Moving Averages and Momentum

The 200-day moving average is sloping up – that’s a bullish sign. And the RSI is around 55, not overbought. So momentum is on the euro’s side, but not extreme. I’d say the path of least resistance is higher.

Level	Type	Significance
0.8400	Support	Key reversal zone, held three times
0.8600	Current	50-day MA, neutral
0.8900	Resistance	2023 high, major breakout level
0.9500	Resistance	Post-Brexit peak, long-term target

Scenarios for EUR/GBP in 2025

Based on everything I’ve analysed, here are two plausible paths.

Bullish Scenario for the Euro

If the ECB holds rates at 4% while the BoE cuts to 4.5%, the gap shrinks to 0.5%. That could push EUR/GBP to 0.90–0.92 by mid-2025. Add in some Brexit trade data disappointing again, and we could see 0.95. I think this is the base case, with about 55% probability.

Bearish Scenario: Sterling Bounces Back

But what if UK inflation falls faster than expected, and the economy picks up? Then the BoE might not cut much, and the pound could rally back to 0.82. I assign this only 20% probability, mostly because the structural issues I mentioned aren’t going away soon.

One more thought: I keep an eye on political risk. If the Eurozone sees a populist surge (like Le Pen in France), that could hurt the euro. But a Labour government in the UK isn’t exactly business-friendly either. So it’s a wash.

How to Trade or Hedge Against the Move

If you agree the euro gets stronger, here’s what I’d do.

For Retail Investors

Buy EUR/GBP in your Forex account, but use stops. The pair is volatile – a 200-pip swing can happen in a day. I like to buy on dips to 0.85 and set a stop at 0.83. For longer-term, consider a currency ETF like FXE (Euro) or just hold some euros in a multi-currency account.

For Businesses with Exposure

If you’re an importer from the Eurozone, lock in rates now with a forward contract. I’ve seen too many small businesses get burned by waiting. A simple 3-month forward at current levels (say 0.86) is cheap insurance if the euro rallies to 0.90.

FAQ

I'm a UK university student paying tuition in euros – should I buy euros now or wait?

My honest advice: don't gamble with tuition. If you need euros in the next 3 months, buy now at around 0.86. If you can wait 6 months, the euro could be a bit higher, but there's risk either way. I'd split – buy half now, half later to average out.

Business owner exporting to Germany – will a stronger euro hurt my profit margins?

Actually, a stronger euro means your pound buys fewer euros, so your export revenue in pounds goes down. That's a real risk. I'd recommend using a forward contract to lock in today's rate for 6 months. It costs a bit, but it's worth the peace of mind. I've seen businesses lose 10% margin just from waiting.

Does the ECB's recent decision change the outlook for EUR/GBP significantly?

The ECB held rates steady in September and hinted at a cut in December. That could weaken the euro short-term. But the bigger story is that the Eurozone economy is stabilising while the UK is still shaky. So even if the ECB cuts, the euro might not fall much. I'm watching the GDP data more than the rate decisions now.

This analysis is based on publicly available data and my own experience. Always do your own research before making trading decisions.