Pound-to-Euro Forecast: GBP Treads Water as UK Growth Outlook in Focus

Modified: Friday, 9 January 2026 16:31 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: GBP Treads Water as UK Growth Outlook in Focus

The Pound-to-Euro exchange rate (GBP-EUR) stabilised above 1.15 as investors looked for clearer evidence that the UK economy can regain momentum into 2026.

With growth expectations shaping interest-rate outlooks, incoming data will be crucial for near-term direction.

GBP/EUR Forecasts: Holds Above 1.15

The Pound to Euro (GBP/EUR) exchange rate has found support above 1.1500, but failed to make headway to trade around 1.1515.

Risk appetite is weaker on Thursday with limited net losses in equities which hampered the Pound in global markets.

Growth indicators will be a key element in the short term as markets attempt to assess the outlook for both the UK and Euro-Zone.

These growth indications will also have significant implications for interest rate expectations and decisions by both the Bank of England and ECB.

The Halifax house price index recorded a 0.6% decline for December after a 0.1% retreat the previous month and compared with consensus forecasts of a 0.1% gain.

The annual increase slowed to 0.3% from 0.6%.

Halifax Head of Mortgages Amanda Bryden commented; “Various forces are poised to somewhat buoy the market heading into 2026. While December’s monthly fall in prices was likely related to uncertainty in the latter part of the year, this should now be starting to unwind.”

She added; “Further, mortgage rates are already reducing following the latest Base Rate cut and there are an increasing number of lending options available for those borrowing at a higher loan-to-value.”

Evidence on consumer spending will be an important factor for growth confidence, especially with expectations of a bounce back from uncertainty ahead of the end-November budget.

Raymond James economist Jeremy Batstone-Carr commented; “Taken together recent UK data confirms that consumers were perhaps less adversely impacted by the budget headlines than had previously been feared, the flip side being that scope for a further strengthening in consumption growth might be rather more limited going forward than had been thought likely."

Geo-political developments have dominated the UK media coverage so far this year, but domestic developments will also be important, especially with Prime Minister Starmer under pressure.

MUFG commented; The Autumn budget may have helped ease fiscal concerns, but that was at a political cost with voters seeing the tax rises as a breach of the spirit of the election manifesto.

It added; “The Reform party remains well ahead in the polls and poor local election results in May could be the catalyst for a leadership election that would likely see government policies shift to the left.”

Political tensions would risk a sell-off in the UK bond market.

There was a slight improvement in the December readings for Euro-Zone business confidence while there was slight deterioration in consumer confidence.

The overall business and consumer confidence index dipped slightly for December which will trigger fresh reservations over the near-term outlook, but there is still net optimism for the 2026 outlook.

MUFG commented on ECB policy; “we do not expect a hike this year although we have removed our previous forecast of another rate cut.”

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TAGS: Pound Euro Forecasts