Pound to Euro Week Ahead Forecast: Near-Term Losses, Potential 2026 Rebound

Modified: Monday, 6 October 2025 09:15 BST - Written by Tim Boyer

STORY LINK Pound to Euro Week Ahead Forecast: Near-Term Losses, Potential 2026 Rebound

The Pound to Euro (GBP/EUR) exchange rate is holding near 1.1480 as traders weigh record equity gains against simmering debt and fiscal concerns. Rabobank expects renewed downside to 1.1250, but Credit Agricole argues the currency is already oversold and poised to recover.

GBP/EUR Forecasts: Budget countdown starts

Rabobank forecasts that the Pound to Euro (GBP/EUR) exchange rate will now retreat to 1.1365 on a 3-month view and weaken further to 1.1250 on a 12-month view amid vulnerable UK fundamentals.

In contrast, Credit Agricole sees scope for strong gains to 1.2050 by the end of 2026.

GBP/EUR briefly traded above 1.15 during the week but failed to hold the gains and settled around 1.1465.

There was little impact from data releases during the week with the bond market relatively stable while the FTSE 100 index hit fresh record highs, but the Pound struggled to benefit.

Markets will be monitoring bond-market developments closely in the short term.


Globally, if US yields move higher and drag UK bonds lower as well, there would be the risk of fresh concerns over debt dynamics and undermine the currency.

Bank of America commented on a measure of UK corporate debt stresses; “Overall, the measure has moved from “no concern” levels to closer to neutral territory over the past few quarters and is currently not too far from “vulnerable” levels.”

It noted concerns over weak profitability and costly financing/rollover conditions increasing vulnerability while activity/ debt service capacity has become less supportive.”

According to the bank; “Going forward downside risks to activity and profitability from fragile demand, high labour costs and tariff along with taxes induced uncertainty ahead of the Autumn Budget suggest that risks to corporate vulnerability are rising.”

Rabobank noted underlying concerns; “In addition to inflation concerns, the UK fundamental backdrop is characterised by high debt, slow growth and a weakened government. While the UK has neither the highest public debt of its peers, nor the most unstable government, the UK’s current account deficit can accentuate the pound’s sensitivity to a worsening in fundamental news.”

Credit Agricole does see scope for a recovery in sentiment; “It would take evidence that the UK economic recovery has regained momentum to encourage FX investors to adopt a less pessimistic outlook on the GBP. In all, we continue to view the GBP as oversold vs the EUR and the USD and believe that many negatives are already in its price.”

It added; “we doubt that the recent market fears are fully justified given the Labour government’s commitment to fiscal discipline.”

Berenberg also sees some scope for a rebound in the Pound; “Barring political upheaval, the outlook for resilient growth, declining inflation and two more 25bp interest rate cuts in the first half of 2026 should support an improvement in economic sentiment that could help turn the government’s fortunes around, so long as it avoids tearing itself apart first.”

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TAGS: Currency Predictions Pound Euro Forecasts