Pound-to-Euro Week Ahead Forecast: Analysts Predict Drop to 1.11 in 2026

Modified: Monday, 10 November 2025 13:11 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Week Ahead Forecast: Analysts Predict Drop to 1.11 in 2026

The Pound to Euro exchange rate (GBP/EUR) opened at 1.1395 (+0.1%) on Monday, recovering slightly from multi-year lows seen on Friday when it traded near 1.1370.

Despite this modest uptick, Sterling remains under pressure amid fiscal tightening signals and dovish Bank of England commentary.

Currency forecasters remain divided, with some analysts predicting further losses to 1.11 by 2026, while others anticipate a long-term recovery to 1.19.

GBP/EUR Forecasts: Pound Sterling Taxed

MUFG forecasts that the Pound to Euro (GBP/EUR) exchange rate will slide to 1.11 by the third quarter of 2026, continuing to recommend selling with a shorter-term target of 1.1240.

Credit Agricole has lowered its Pound forecasts following recent losses but still expects notable gains to 1.19 by the end of next year.

GBP/EUR dipped sharply to 30-month lows just below 1.1325 during the week before a tentative recovery to 1.1370.

Fiscal and monetary policy outlooks have both triggered renewed Pound selling. Chancellor Reeves signalled strongly that taxes would be increased in this month’s budget. A net fiscal tightening would dampen growth and increase scope for a looser monetary policy.

SocGen commented; “The Chancellor warns that we are slaves to the bond market. Looks like tighter fiscal policy without spending restraint is the chosen cure, and I can’t see anything GBP-friendly in that.”

The Bank of England held interest rates at 4.00% at the latest policy meeting, in line with consensus forecasts. However, there was a very close 5-4 vote as Dhingra, Taylor, Ramsden, and Breedon voted for a cut.

Governor Bailey voted with the majority, although he added that the inflation risks were now more balanced.

MUFG commented; “It’s clear that Bailey’s view is key in a divided MPC. It seems that he is close to siding with the doves and voting for a cut.”

The bank added; “This meeting saw an overhaul in the way the BoE communicates its decisions – but ultimately the story remains the same. Inflation has probably peaked, but it makes sense to wait for more confirmation before easing policy again. We maintain our view that the BoE will cut in December and then twice more next year to 3.25%.”

Following the meeting, there was a limited shift in pricing, but markets are still not convinced that rates will be cut in December.

ING commented on the December outlook; “That outcome is only priced with a 70% probability right now, meaning that there is scope for lower short-term rates and a weaker pound.”

Credit Agricole notes that the Pound has remained under pressure but added; “That being said, we also take into account the fact that many negatives are already in the price of the GBP. In particular, we believe that UK rates markets have turned too dovish on the BoE and expect the bank rate to settle around 3.5% in 2026 or higher than the current market expectations.”

Upcoming Economic Events Likely to Impact GBP/EUR

• GBP Events:
  • Tue 00:01 GBP: BRC Retail Sales Monitor YoY (Oct) (f: 1.70%) [High]
  • Tue 07:00 GBP: Employment Change (Sep) (f: 50.00) [High]
  • Tue 07:00 GBP: Unemployment Rate (Sep) (f: 4.90%) [High]
• EUR Events:
  • Tue 10:00 EUR: ZEW Economic Sentiment Index (Nov) (f: 41.50) [High]

These events could lead to further volatility in both currencies, especially with a key focus on UK labour market data and retail sales figures, alongside the release of the ZEW Economic Sentiment Index for the Eurozone.

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TAGS: Pound Euro Forecasts