GBP/USD’s declined by 0.71% on Monday following tough talk from US President-elect Donald Trump in which he threatened to hit the BRICS trading bloc with 100% tariffs unless it gave up its search for an alternative to the US Dollar. Stronger-than-expected US Purchasing Manager Index (PMI) data further boosted the Buck.

NatWest expects GBP/EUR will strengthen to 1.22 at the end of 2025 on the back of yield support, but underlying UK vulnerabilities will tend to limit gains, especially if fear dominates markets. The Pound has benefited from high interest rates during 2024, especially with the ECB cutting interest rates three times this year.

The Pound to Euro exchange rate is up 4.67% in 2024, and the Pound to Dollar exchange rate is down 0.40%, making Serling the second-best performing G10 of the year after USD. The Bank of England expects interest rates to be cut at a steady one-per-quarter rate in 2025, which implies four 25-basis point cuts.

Sterling gained against the dollar on Tuesday after dovish comments from Federal Reserve Governor Christopher Waller and was steady against the euro as political turmoil in France kept investors on edge.

Pound Sterling jumped after the UK reported a broad-based inflation rise in October. The Pound to Euro exchange rate rallied to 1.20 in the minutes after the ONS said CPI inflation rose to 2.3% year-on-year in October from 1.7% in September, which was a bigger rise than the 2.2% the market was anticipating.

Sterling dropped versus the dollar and rose against the euro on Monday, with political troubles in France and the so-called Trump trade back in focus.