How is the pound doing and where will it fall furthest given current headwinds?

The Pound’s been a real standout in 2025, not just against the Dollar and Euro, but also flying high against CAD, AUD (now above 2.00), and JPY (hovering around 195). What’s driving this? UK inflation is staying below 2%, and with the Bank of England holding off on cutting rates until later this year, the UK still has one of the more attractive yield environments. That’s pulling in foreign investment and keeping GBP strong. While global risks remain, the Pound’s performance this year has been backed by solid fundamentals and a cautious, sensible approach from the BoE. One of the best performing major currencies so far, and not by accident. If you’re heading to Europe soon, now’s a good time to lock in your Euros. But for Dollar buyers, it might be worth holding off; GBP/USD could still push higher.

Sterling has been on a downward trajectory for four weeks, with more than 2% lost against the euro since reaching an eight-week high at the end of May. The pound has suffered thanks to weak economic data, with GDP having contracted in April as businesses and consumers faced a raft of tax rises, unemployment rose to its highest level since 2021, and inflation remains stubbornly high. The UK is facing stagflation - persistently high inflation and weak or negative economic growth.