British Pound to Euro Forecast: GBP Advances amid Russia-Ukraine Uncertainty

Modified: Monday, 5 January 2026 13:46 BST - Written by Frank Davies

STORY LINK British Pound to Euro Forecast: GBP Advances amid Russia-Ukraine Uncertainty

The Pound to Euro exchange rate (GBP/EUR) climbed to a ten-week high on Monday as renewed geopolitical tensions weighed on the single currency.

At the time of writing, GBP/EUR was trading around €1.1521, up more than 0.3% on the session.

The Euro (EUR) weakened at the start of the week as investors reassessed geopolitical risks linked to the Russia–Ukraine conflict.

Market nerves were unsettled following the US military intervention in Venezuela and the capture of President Nicolás Maduro over the weekend, developments that sparked broader concern over how Washington’s actions could influence the war in Eastern Europe.

While peace talks between Moscow and Kyiv remain nominally on the agenda, the conflict itself shows little sign of easing. Russian President Vladimir Putin has reiterated that any settlement must recognise Russia’s control over annexed Ukrainian territories, warning these objectives would be pursued either through diplomacy or continued military force.

Investors fear the US move in Venezuela could harden Moscow’s stance, potentially encouraging the Kremlin to push more forcefully for territorial concessions. This uneasy backdrop weighed on the Euro through Monday’s session.

Additional pressure came from a firmer US Dollar, with EUR suffering due to its strong inverse relationship with the ‘Greenback’.

The Pound (GBP), meanwhile, found modest support as investors continued to reassess Bank of England (BoE) interest rate expectations.

Following December’s rate cut, the BoE struck a more cautious and hawkish tone than markets had anticipated, prompting a small but supportive shift in policy pricing. This recalibration helped underpin Sterling as markets moved into the new year.

That said, the absence of fresh UK economic data kept GBP trading within a narrow range, limiting the scope for more decisive gains.

GBP/EUR Forecasts: Softer German Inflation to Pressure the Euro?

Looking ahead, attention turns to Tuesday’s release of the final services PMIs for both the Eurozone and the UK, which could shape near-term movement in the Pound Euro exchange rate.

The Eurozone services PMI is expected to signal a slowdown in activity in December. Confirmation of softer momentum in the bloc’s dominant services sector could place renewed pressure on the Euro.

In the UK, the final services PMI may indicate improved activity at the end of the year, potentially offering the Pound some limited support. However, optimism could be tempered after last week’s downward revision to the UK’s manufacturing PMI. A similar downgrade to the services reading may instead leave Sterling on the back foot.

Later in the session, focus shifts to Germany’s preliminary inflation figures for December. Headline inflation is forecast to cool from 2.3% to 2.0%, and confirmation of easing price pressures could weigh further on the Euro.

Such a result would likely be interpreted as a sign that inflation is softening across the wider Eurozone, potentially reinforcing expectations for a more dovish European Central Bank (ECB) stance.

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TAGS: Pound Euro Forecasts