Pound to Euro Week Ahead Forecast: GBP Resilient, EUR Structural Edge

Modified: Monday, 2 February 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: GBP Resilient, EUR Structural Edge

The Pound to Euro exchange rate (GBP/EUR) is holding near 1.1540, but major banks warn that strong underlying euro demand driven by de-dollarisation flows and weaker UK fundamentals could push the pair sharply lower in the coming months.

GBP/EUR Forecasts: Euro power?

Nomura is forecasting renewed Pound to Euro (GBP/EUR) exchange rate losses over the next few months with a target of 1.1170 by the end of April.

BNP Paribas has a notably negative medium-term view on the Pound and forecasts a GBP/EUR slide to 1.0870 by the end of this year with further losses to 1.0640 by the end of 2027.

GBP/EUR found support on dips during the week and settled with limited gains to around 1.1540.

The Pound was broadly resilient amid a Euro surge against the dollar and drew relief late in the week from a Euro correction.

Despite some positive releases, Nomura maintains a lack of confidence in the UK growth outlook; The latest UK data did little to shift our view that risks remain biased to the downside on rates with a loosening labour market, slowing wage growth and a broadly disinflationary process still underway.”

In this context, it expects further Bank of England rate cuts

Nomura also expects strong underlying Euro demand from a global perspective if the dollar is shunned; “Recent geo-political tensions have shifted the market focus to the possibility of a de-dollarisation trade, which we think may benefit EUR as one of the few viable alternatives to USD investments in terms of market size and liquidity.”

BNP also expects lower yields; “with growth lacklustre and inflation set to cool we expect the Bank of England to continue easing.”

The bank also expects other Pound risks; “Political uncertainty remains. While the recent budget was taken well by investors, we see a tail risk from a potential shift to a less market-friendly leadership of the ruling Labour Party. The May local elections are key to watch.”

The UK runs a current account deficit which will maintain potential Pound vulnerability.

According to BNP; “We do not expect any supportive GBP-buying flows from UK pension funds. Moreover, we consider retail investors to be an on-going source of outflows as they continue to favour buying foreign equities.”

BNP also maintains a positive stance on the Euro; “As far as the Euro is concerned, it noted our above-consensus call for 2026 Euro-Zone GDP growth of 1.6% which should translate to a stronger EUR through the growth and sentiment channels.”

There has been some speculation that the ECB will be uneasy over Euro strength against the dollar which could trigger a renewed cut in interest rates and undermine the Euro on the crosses..

ING commented; “The debate about whether the euro's strength will affect ECB policy is intensifying.”

It added; “The latest EUR/USD rally has already caused two members, Martin Kocher and Francois Villeroy, to express concerns that currency strength could prompt lower inflation and, in turn, looser policy.”

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TAGS: Pound Euro Forecasts