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Sterling could face a tricky 2025 as economists predict more interest rate cuts.
The pound strengthened by around 0.5% against the euro on New Year’s Eve and has largely held onto those gains, and the reverse is true against the US dollar, where GBP is back close to its weakest since April.
We have just had the Nationwide House Price index, which found that UK house prices climbed by 0.7% on a monthly basis in December. Across the whole of 2024, house prices rose by 4.7%, the fastest annual pace since October 2022.
There remains a dearth of data for the markets to work on, but we will get final PMI (purchasing managers index) readings over the next few days.
With less than three weeks to the inauguration of Trump as US president the many predictions for economies and exchange rates over the next few months have taken on a whole new interest. The FT’s poll of 72 economists found an average prediction of 0.9% growth in the eurozone in 2025, despite expecting tariffs leading to a trade war.
Meanwhile in The Times, 51 economists were polled and the majority predicted that the Bank of England will be forced by weak, zero or negative economic growth to cut interest rates four times in 2025, down to 3.75%.
As the saying goes, economists have predicted eight of the last five recessions, and it is little but guesswork. However, this does go well beyond the two rate cuts priced into sterling exchange rates. If true, this could well spell bad news for the pound.
So, make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Account manager on 020 3918 7255 to get started.
GBP: Uncertain sterling could go either way
After a patchy performance over the Christmas period, with losses against the US dollar but strong gains against JPY, NZD and others, it will be all eyes on the data at the start of 2025. We will get a final result for manufacturing PMI shortly and some mortgage and borrowing data tomorrow.
GBP/USD past year
EUR: Will PMI offer any hope?
There was little movement for the single currency over recent days and it starts this month largely mirroring sterling, with losses against the dollar but some 3% up on AUD, JPY and NZD compared to the start of December. Coming up today, final PMI results for manufacturing across the eurozone.
EUR/USD past year
USD: Dollar looks to build on gains
It hardly needs pointing out that the dollar has carried all before it over the past month, but those gains appear to have run their course for now. Watch out for unemployment data today and PMI tomorrow.
USD/GBP past year
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