Pound-to-Euro Forecast News: Stronger GDP Lifts GBP Against EUR

Modified: Thursday, 15 January 2026 09:16 BST - Written by Tim Boyer

STORY LINK Pound-to-Euro Forecast News: Stronger GDP Lifts GBP Against EUR

The Pound to Euro exchange rate has firmed after stronger-than-expected UK growth data, with GBP/EUR trading around 1.1554, leaving the pair within striking distance of 4-month highs.

UK GDP rose by 0.1% in November, outperforming market expectations and easing fears of a technical contraction in the fourth quarter after two consecutive months of decline. The data has helped stabilise Sterling sentiment at a time when the Euro remains constrained by geopolitical uncertainty and fragile regional growth signals.

The GDP release reduces immediate recession risks and helps underpin confidence in UK assets, particularly after recent concerns that weak activity would amplify political and fiscal uncertainty.

Stronger data also alleviates pressure on the government following heightened speculation over Prime Minister Starmer’s leadership ahead of the May local elections. While political risks remain, improved growth momentum reduces the likelihood of near-term instability becoming a dominant market theme.

RBC Capital Markets previously warned that political uncertainty had replaced fiscal concerns as a key investor focus, noting:
“While the Budget reduced fiscal uncertainty, political uncertainty has moved up the list of investors’ concerns.”

For now, the GDP upside surprise limits those risks and supports Sterling resilience.

BoE Outlook Still Key for Sterling

Monetary policy expectations remain central to the Pound’s medium-term direction. Speaking on Wednesday, Bank of England external member Alan Taylor reiterated his dovish stance, expressing greater confidence that inflation will return to target sooner than previously projected.

“We can now see inflation at target in mid-2026, rather than having to wait until 2027,” Taylor said, adding that cooling wage growth supports further policy normalisation.

He noted that interest rates are likely to “continue on a downward path” if incoming data remains consistent with recent trends. While Taylor’s comments did little to materially shift market pricing—given his well-known dovish lean—they reinforce expectations of gradual easing through 2026.

Comments later today from Deputy Governor Dave Ramsden will be monitored closely for any signal that the more cautious wing of the committee is aligning with this view.

Geopolitics Still a Wild Card for the Euro

Beyond domestic factors, geopolitical developments continue to influence the Euro. Tri-lateral talks between the US, Denmark and Greenland are due later Wednesday, with markets watching for any reduction in tensions following recent US rhetoric.

ING commented that markets have so far priced in only limited risk:
“So far, the US threats regarding Greenland have had little discernible market impact… Still, any progress could remove a lingering geopolitical ‘black swan’ risk for European currencies.”

For now, the combination of firmer UK growth data and subdued Euro sentiment leaves GBP/EUR biased to the upside, with a sustained break above 1.1570 likely to open the door to fresh multi-month highs.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts