British Pound to Euro Forecast: GBP Steadies as "Starmer Going Nowhere"

Modified: Tuesday, 10 February 2026 12:31 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Steadies as "Starmer Going Nowhere"

The Pound to Euro exchange rate (GBP/EUR) is under renewed pressure as UK political risk re-enters the spotlight, with mounting speculation over Prime Minister Keir Starmer’s leadership weighing on Sterling sentiment and unsettling gilt markets.

A dovish Bank of England pivot has compounded the pressure, leaving the Pound vulnerable as investors reassess fiscal credibility and rate-cut risks.

GBP/EUR Forecasts: Dip to 2-Week Lows

The Pound to Euro (GBP/EUR) exchange rate attempted to rally on Friday, moving back above the 1.1500 level, but failed to hold the gains and retreated again on Monday to trade at 2-week lows just below 1.1470.

The Pound was again hit by political jitters with no end to the Mandelson scandal while the dovish Bank of England policy meeting last week has also damaged Sterling amid stronger expectations that interest rates will be cut in March.

According to ING; “0.8740/45 looks the initial target for EUR/GBP,(1.1430 for GBP/EUR) with the risk to 0.8800 if it were to appear as though Starmer will step down.(1.1360 for GBP/EUR).”

On a longer-term view, Danske Bank commented; “We aim for EUR/GBP at 0.89 levels on a 12M horizon (1.1240 for GBP/EUR) on decreasing rate differentials, relatively weaker growth outlook in the UK and positive correlation to a USD negative environment.”

A key issue will inevitably be fears that any change in Prime Minister would also lead to a new Chancellor with the potential for a revised fiscal stance and change in fiscal rules.

As far as financial markets are concerned, traders will be monitoring the UK bond market closely with fears that gilts and the Pound will both be hit by selling.

The 10-year yield edged higher to 4.54% on Monday and close to 2026 highs. If yields continue to increase, the Pound will be vulnerable.

Over the weekend, Prime Minister Starmer’s chief of staff McSweeney resigned over the Mandelson affair in an attempt to deflect pressure away from Starmer.

He is, however, still seen to be in a very vulnerable position given that ultimately it was his decision to appoint Mandelson as US Ambassador.

Starmer’s rivals in the party will inevitably be looking to force him out and trigger an election contest.

According to ING; “Questions over PM Starmer's judgement are likely to remain as the decision to appoint Mandelson faces further official scrutiny, and the Labour Party also faces a political reckoning at a by-election in late February and local elections in May.

It added; “Expect pressure to remain on both sterling and Gilts as the market speculates over a change of personnel at numbers 10 and 11 Downing Street.”

MUFG commented; “Starmer was reportedly drawing up plans for an emergency address to the nation to set out plans to clean up politics. He is expected to address MPs today at a meeting of the Parliamentary Labour party.”

It added; “The pick-up in UK political uncertainty has arrived earlier than we had anticipated triggered by the Epstein scandal and could yet trigger a sharper pound sell-off if there is a leadership challenge.”

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TAGS: Pound Euro Forecasts