British Pound to Euro Forecast: GBP Nears Best Levels in Four Months

Modified: Friday, 16 January 2026 11:31 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Nears Best Levels in Four Months

The Pound-to-Euro exchange rate (GBP/EUR) edged higher after traders absorbed stronger-than-expected UK GDP data, with Sterling finding support as immediate recession fears eased and risk appetite improved.

GBP/EUR Forecasts: Looking to Target 4-Month Highs

There was a muted initial response to the UK GDP data, but the Pound has gained some traction with the Pound to Euro (GBP/EUR) exchange rate edging above the 1.15750 level.

GBP/EUR needs to move above 1.1570 to reach a 4-month high.

There was stronger than expected GDP data while risk appetite was stronger amid immediate relief that there have been no US attacks on Iran.

ING sees scope for short-term Pound gains; “Given the positioning, we think EUR/GBP support at 0.8645/55 looks vulnerable and the risks are building towards a breakdown to 0.8600 next week (Gains to 1.1630 for GBP/EUR).

ING still expects Pound losses later in the year.

MUFG played down the GDP impact; “While the upside growth surprise is a welcome development, it does not significantly alter our expectations for further BoE cuts and a weaker pound this year.”

UK GDP increased 0.3% for November after a 0.1% decline the previous month and compared with consensus forecasts of a 0.1% advance for the month.

For November, the services sector grew 0.3% while there was a 1.1% gain for industrial production as Jaguar Land Rover output continued to rebound from the cyber attack.

There was, however, a 1.3% slide in construction output.

ING expressed concern over the construction sector; What really stands out in these figures, though, is what’s happening in construction. Output was down sharply (again) in November and is now almost 3% lower since July. That goes hand-in-hand with a purchasing managers index (PMI) which has recently fallen off a cliff.”

Wider economic fears will ease to some extent.

According to Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK; “The risk that the economy outright contracted in Q4 has sharply receded.”

He was still cautious over the outlook; “However, we doubt the economy did little more than stagnate in Q4, as the initial data for December has been weak, and doctor’s strikes will add to the drag on growth.”

There are potentially significant implications for monetary and fiscal policy

Pugh added; “The stronger-than-expected outturn in November will also further dent any chances of a back-to-back rate cut in February. We doubt the next rate cut will come until April.”

Markets see less than a 10% chance of a February rate cut.

National Institute of Economic and Social Research senior economist Ben Caswell noted; “Given today’s figure, we now project that the economy grew 1.4 per cent in 2025 - a rise in the growth rate compared to the year before.

He added; “Against this backdrop, the Chancellor more than doubled her fiscal headroom at the Budget in an effort to bolster economic confidence. While it is too early to see the full effect of this, the move appears to have eased speculation over future tax policy and the uncertainty that came with it.”

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TAGS: Pound Euro Forecasts