British Pound to Euro Forecast: GBP Rebound as Starmer "Avoids Exit"

Modified: Wednesday, 11 February 2026 11:01 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: GBP Rebound as Starmer "Avoids Exit"

The Pound to Euro exchange rate (GBP/EUR) has rebounded from two-week lows below 1.1450 as immediate fears of a leadership crisis around Prime Minister Keir Starmer eased, helping Sterling recover alongside a sharp pullback in UK bond yields.

While political tensions remain elevated ahead of February’s by-election and May’s local elections, stabilising gilt markets and firmer UK retail data have allowed GBP/EUR to reclaim ground toward 1.1500.

GBP/EUR Forecasts: Rally from 2-Week Lows

The Pound to Euro (GBP/EUR) exchange rate slumped to 2-week lows below 1.1450 on Monday before rallying to 1.1480. UK political events dominated, although there was an element of support from global equities which registered a fresh record high and significant relief in the bond market.

Underlying tensions will continue and evidence of a rebound in the German and Euro-Zone economy will also make it difficult for the Pound to secure sustained gains. MUFG maintains a year-end GBP/EUR target of 1.11 amid weaker UK fundamentals.

The Pound was hurt by the resignation of Prime Minister Starmer’s chief of staff and communications director while Scottish Labour leader Sarwar openly called for Starmer to resign.

Sterling rallied as Starmer received the backing of all cabinet members and the risk of an immediate resignation has eased.

MUFG commented; “According to Labour sources there is strong opposition within the party to triggering a leadership contest before the local elections in May. A development that should help to reduce the risk of a sharper pound sell-off in the near-term.”

The UK bond market will continue to be watched closely and there was notable relief on Tuesday with the 10-year yield retreating sharply to around 4.51% from highs at 4.60% on Monday.

The government still faces a tough by-election late in February and local elections in May. Underlying tensions will remain with opinion polls watched very closely. In this context, there will still be a high degree of uncertainty over the outlook.

Danske Bank discussed the underlying threat; “The risk of Starmer being replaced by a more left leaning candidate increases the likelihood of more expansionary fiscal policy, an increase in the debt burden and a possible abolishment of the fiscal rules, which are in place to balance day to day spending. Coupled with elevated uncertainty this would be negative for UK markets.”

It added; “With local elections in the spring, where Labour is likely to lose ground this should only increase the pressure further. Prediction markets are currently at around 80% for Starmer out before YE.”

There was an element of support from the latest data with the British Retail Consortium (BRC) reporting like-for-like retail sales growth of 2.3% in the year to January from 1.0% previously.

BRC Chief Executive Helen Dickinson commented; “A drab December gave way to a brighter January as retail sales picked up pace. Many shoppers had held off Christmas spending and waited for the January sales, with the start of the new year showing the strongest growth.”
The Euro-Zone Sentix investor confidence index strengthened to 4.2 for February from -1.8 previously and above consensus forecasts of -0.2.
Sentix commented; “Despite discussions about a gas shortage, the investors surveyed by Sentix are also extremely confident about the German economy.”

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TAGS: Pound Euro Forecasts