Will the pound get stronger in 2025?

Updated 2 May 2025

The pound was one of the best performing currencies in 2024, although fresh concerns about the health of the UK economy stifled Sterling’s progress towards the end of the year.

So far 2025 has been a rocky ride, with GBP exchange rates plummeting early in the year as panic gripped the UK bond market. Sterling managed to rebound, but US President Donald Trump’s upending of international trade has since stoked significant volatility.

Overall, we expect the pound to continue fluctuating this year amid the heightened uncertainty. While the outlook is highly contingent, we believe it’s likely that GBP/EUR and GBP/USD could trend higher, if the UK economy proves relatively resilient to global trade tensions.

However, there are many unpredictable factors at play, particularly Trump’s erratic approach to policy and the unknown economic impacts of the shifting trade landscape. In addition, geopolitical tensions and external shocks could also drive significant volatility this year.

GBP forecast for 2025: A rocky road for the pound?

The first half of 2025 has already seen huge swings in the pound, with the UK currency hitting a 17-month low against the euro and a three-year high against the US dollar.

These sharp moves came as US President Donald Trump upended the international trade order with sweeping tariffs, leading to a confidence crisis in the US dollar and ushering in a new era of global uncertainty.

The result has been mixed for the pound. On the one hand, investors are hopeful that the UK economy will be relatively well insulated from the negative impacts of growing trade tensions. On the other, the UK could become a destination for cheap goods, thereby dampening inflation and leading to more Bank of England (BoE) interest rate cuts.

These two opposing forces could continue to pull the pound in different directions through the second half of the year, while other factors – such as trade deals or disputes, economic developments, or geopolitical events – could add to the volatility.

We expect it to be a bumpy year for GBP and the wider currency market. The second half of the year could potentially see Sterling strengthen, if the UK economy fares better than other countries amid rising trade tensions. However, the pound could face headwinds if disinflation forces the Bank of England to cut interest rates faster and further than anticipated.

A pick-up in economic activity through the summer could be positive for the pound, particularly if the government’s planning reforms and investment measures start to spur growth.

With that said, we cannot understate the uncertainty ahead. So much hinges on Trump’s erratic approach to policy, how US allies and adversaries respond, and the unpredictable impacts of a changing world order.

Will the pound get stronger against the euro?

When we look at the GBP/EUR exchange rate for the remainder of 2025, it’s possible that the pound could get stronger against the euro from its current level.

Through the first half of the year, the single currency has been supported by a return to political stability in Germany, an €800bn EU defence spending plan, the collapse in the US dollar, and a flight to safety.

However, there could be headwinds on the horizon for EUR. If the US and the EU can’t come to an agreement on trade, a transatlantic trade war could threaten the Eurozone’s struggling economy.

The bloc may also import more from China. This could hurt European manufacturers, with cheaper Chinese imports undercutting EU-made products, while also dampening inflation, potentially leading the European Central Bank (ECB) to continue cutting interest rates.

Meanwhile, France’s political landscape remains unstable. Although Prime Minister François Bayrou managed to force the 2025 budget through parliament and survive subsequent no-confidence motions, the National Assembly remains deeply divided. The government’s position is precarious, and further political challenges could arise later this year.

On the other hand, if the crisis in the US dollar continues then the euro could reap the benefits. As USD becomes less attractive as a reserve currency, EUR could increasingly be seen as a safe and stable alternative.

Will the pound get stronger against the US dollar?

Whether the pound will rise or fall against the US dollar for the rest of the year is highly dependent on US policy, meaning the outlook for GBP/USD is deeply uncertain.

So far this year the US dollar has collapsed, raising fears that we could be on the brink of a US dollar crisis. Worries about a US recession and the policy credibility of the Trump administration have led to a significant repricing of USD and speculation that this could be the beginning of the end of dollar dominance.

The pound could get even stronger against the ‘greenback’ this year if the dollar confidence crisis persists, or USD could regain its footing as Trump pursues pro-growth measures. Either way, we expect to see big swings in GBP/USD.

The worst-case scenario for the dollar sees Trump’s tariffs tip the US economy into a recession while keeping inflation elevated. Trump could conceivably challenge the Federal Reserve’s independence, further undermining credibility and devaluing the dollar.

Conversely, Trump could strike favourable trade deals, cut taxes, and slash regulation, giving the US economy a short-term boost. If interest rates remain relatively high and Trump leaves the Fed alone, this could also lift the ‘greenback’.

Between these two extremes, there are a huge number of possibilities, and Donald Trump’s unpredictable style of politics has led to acute uncertainty. As a result we expect the dollar to continue trading in a wide range, with any surprise political events or announcements likely to infuse the currency market with volatility.

Concerned about how shifting exchange rates could impact you in 2025?

If you’re worried about how the changing value of the pound, euro or US dollar could impact you this year, get in touch with us. We can help you time your transfers, protect against volatility, and get the best possible exchange rate.

With free expert guidance and various transfer options – such as targeting or fixing an exchange rate – you’re better equipped to navigate the ups and downs of the currency market. Create a free account online today.