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"Outlook for Pound and Euro remains challenging as both face significant headwinds"

ended 06. January 2025

The Euro has had a tough start to the New Year and many traders believe it will reach parity with the Dollar in 2025, and may go even lower. Newspage asked forex experts what's driving the downward slide in the Euro and where they think it could end up. Also, are they expecting the greenback to strengthen ahead of Trump's inauguration? And how will the Pound perform against the Euro and Dollar in the weeks and months ahead? Their views are below.

4 responses from the Newspage community

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Editor
Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
As the world braces for Trump's return, 2025 could be the year the euro tests the limits of gravity, with the Pound and Dollar rising to seize the spotlight. The combination of fiscal stimulus, protectionist measures and a cautious Fed could see continued Dollar dominance on the horizon, with the greenback set to reach multi-year highs. In response to Trump's expected trade policies, the ECB will likely implement dovish monetary measures, leading to the Euro potentially flirting with parity against the Dollar by the end of 2025. The block has had a tough year, with political turmoil reverberating across the eurozone and a looming budget crisis putting significant downward pressure on the Euro, causing bond yields to spike. However, the Pound also finds itself grappling with its own set of challenges but potential respite may be on the horizon, as while sterling has recently slipped to fresh lows against the Dollar, it could find a somewhat firmer footing versus the Euro.
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Prem Raja
Head of Trading Floor at Currencies 4 You
The Euro has had a very rough few months, falling from 1.10 against the Dollar to a 2 year low of 1.0250. The Euro has also weakened against Sterling with exchange rates sitting at 1.20 at the tail end of last week. Much of the recent moves against the Euro have mainly been due to Dollar and Sterling strength, coupled with political and economic stability across Europe. With issues in Germany and France overshadowing any positivity for the single currency, we also have the potential of tariffs being introduced by President Trump in 2025 which would also be negative for the Euro. I do see parity on EURUSD again as a real possibility this year, and potentially rates to fall lower. Over the next few weeks I see more Euro weakness against the Dollar. We may see GBPEUR stay within this 1.20-1.21 range due to current UK economic uncertainty. For Euro buyers, there are fantastic opportunities on the horizon.
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Editor
Tony Redondo
Founder at Cosmos Currency Exchange
The US Dollar was the best-performing G10 currency in 2024, bolstered by a strong economy and the Federal Reserve's guidance indicating only two quarter-point rate cuts in 2025. Rising oil and gas prices, which are priced in Dollars, further strengthen its position. In contrast, the Pound recently hit a nine-month low against the Dollar due to declining UK bond yields, signalling expectations of more interest rate cuts from the Bank of England in 2025. The UK was the fastest-growing G7 economy in the first half of 2024 but fell to last place in the second half, prompting a dovish outlook from the Bank. Meanwhile, the Euro has fallen to its lowest level against the Dollar since November 2022, with analysts predicting further declines due to political instability in Germany and France and economic struggles in the Eurozone, likely to be made worse by the proposed Trump trade tariff increases. The outlook for both the Pound and Euro remains challenging as both face significant headwinds.
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Kundan Bhaduri
Entrepreneur, Investor and Landlord at The Kushman Group
The outlook for the Pound and Euro reflects the challenges of navigating a turbulent economic landscape. Inflationary pressures, energy concerns, and cautious central banks have put both currencies under strain, with the Euro edging uncomfortably close to parity with the Dollar. Meanwhile, the Pound faces its own battles, from domestic fiscal concerns to global market volatility.

The Dollar’s strength, driven by economic resilience and expectations of further rate hikes, adds another layer of complexity. For businesses and traders, the focus should be on managing risk in this uncertain environment. The key takeaway? Volatility isn’t going anywhere soon, and a clear, adaptive strategy will be essential to weather the storm.