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Sterling is battling with a struggling economy, while the US dollar strains to navigate Trump 2.0.
The UK enjoyed the fastest rate of economic growth of any G7 nation in the first quarter of 2025. But since then, the mood has turned notably gloomy. Growth has stagnated and recent drama over in Westminster ushered in some weakness for sterling and ignited a brief bond market tantrum.
But businesses care less about the past than the present. What do these trends mean for your budget moving forward, and what are the key risks you might face before autumn arrives?
For the full low-down, you can download your copy of our July-September Quarterly Forecast right here.
Forecasts and predictions
GBP/USD
A selection of leading banks set a 10-cent range for where the pound might move against the US dollar this quarter. So far, sterling has very much been testing the lower end of the 1.33-1.43 that was predicted.
As we move into August, it does very much feel as though the US dollar has regained its poise. A (reasonably) painless resolution to the trade crisis has fuelled a mini resurgence, but don’t count on this lasting forever. There are still major question marks around the dollar’s strategic viability in this immensely volatile era.
GBP/EUR
Sterling has come under pressure from a rejuvenated euro already this quarter, threatening the lower end of the 1.14-1.19 range predicted by the banks. A gloomy economic picture in the United Kingdom hasn’t helped matters, nor has
The single currency has managed to strengthen even with the European Central Bank’s interest rates (2%) sitting well below those set by the Bank of England (4.25%).
EUR/USD
The recent trade deal between the European Union and the United States has put the dampers on a euro charge. Europe’s business community was underwhelmed by the terms of the deal, which is predicted to have a mildly negative impact on growth overall.
But the wider trends seem positive for the euro. Policymakers are striving to make the euro the world’s de facto reserve currency, and the promise of more government spending from the sleeping giant in Germany
It takes more than forecasts
Of course, the bank predictions we present in our latest quarterly forecast are just that. It is a thankless, impossible job to try and second guess where exchange rates will move in a three-month period. Often, the forecasts prove hopelessly wide of the mark.
That’s not the fault of the banks. The truth is there are simply too many vagaries, nuances and complexities to be able to accurately predict a currency’s path.
Businesses should be aware of the risks to their cashflow and profit margins should something even worse materialise. After all, those “Black Swan” events we warn about are cropping up more than ever these days.
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 account manager on 020 3918 7255 to get started.
