British Pound to Euro Forecast: GBP Stalls Despite UK Growth Boost

Modified: Tuesday, 27 January 2026 10:46 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: GBP Stalls Despite UK Growth Boost

The Pound to Euro exchange rate (GBP/EUR) has stalled below key resistance near 1.1550 as strong UK PMI data and delayed Bank of England rate-cut expectations clash with renewed Euro demand driven by a broader dollar slide.

GBP/EUR Forecasts: Held Below Key Resistance

After hitting weekly highs near 1.1550 on Friday, the Pound to Euro (GBP/EUR) exchange rate has consolidated around 1.1525.

Pound sentiment remains firmer after strong data on Friday, but a wider dollar slide has helped support the Euro in global markets and blocked the potential for further GBP/EUR gains.

Key resistance areas remain in the 1.1550-70 area. GBP/EUR has not traded above 1.1570 for four months and will need to break above this area to trigger a wider shift in underlying sentiment.

Overnight, there has been a fresh surge in precious metals with gold and silver jumping to fresh record highs.

Moves in equity markets have been contained, limiting the risk of Pound selling while there will be some relief that the UK 10-year bond yield has dipped back below the 4.50% level.

Stronger than expected PMI business confidence data boosted the Pound on Friday.

MUFG commented; “It provides further evidence that the UK economy is picking up after budget uncertainty held it back in the autumn. It has prompted market participants to scale back BoE rate cut expectations. The timing of the next BoE rate cut has been delayed until April.”

Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics added; "The Flash PMI leaping in January gives a further signal that GDP growth is likely to pick up in Q1, as the economy continues to recover from months of pre-Budget anxiety."

MUFG also pointed to underlying UK political stresses with the Labour Party NEC blocking a bid by Greater Manchester Mayor Burnham to run in the Gorton by-election.

According to the bank, the move could ease immediate concerns for the Pound, but could backfire if Labour loses the by-election.

It added; “We continue to believe that the local elections pose downside risks for the pound, and are not convinced that stronger growth will prevent the BoE from lowering rates further this year if inflation falls back closer to target as we expect.”

In this context, expectations surrounding Bank of England policy will be an important element for the Pound.

The German IFO business confidence index was unchanged at 87.6 for January and below consensus forecasts of 88.3 with no significant change in the current conditions or expectations components.

The IFO commented; “The German economy is starting the new year with little momentum.”

According to ING; “An unchanged Ifo index in January reflects the uncertainty that has hit the German economy again on the back of geopolitical tensions and tariff threats. However, for now, we stick with our view of an upcoming recovery.”

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TAGS: Pound Euro Forecasts