Pound to Euro Week Ahead Forecast: UK Data, Elections Decide Next GBP Move

Modified: Monday, 16 February 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: UK Data, Elections Decide Next GBP Move

The Pound to Euro exchange rate (GBP/EUR) has stabilised near 1.15 after political pressure on Prime Minister Starmer briefly pushed the pair to two-week lows, with markets now balancing UK political risk against expectations for Bank of England rate cuts and

GBP/EUR Forecasts: Politics vs BoE Rate-Cut Expectations

ING forecasts that the Pound to Euro (GBP/EUR) exchange rate will slide to 1.11 on a 12-month view.

Credit Agricole is more positive on the Pound outlook and maintains a year-end forecast of 1.1765.

The Pound dipped sharply early in the week with GBP/EUR dipping below 1.1450 amid increased pressure on Prime Minister Starmer as the Scottish Labour leader called for his resignation and two senior advisers were sacked. GBP/EUR managed to crawl back towards 1.15 as Starmer managed to stabilise the immediate situation.

In the week ahead, political developments will continue to be monitored closely. In addition, there will be important data releases on the labour market and inflation as well as the latest PMI business confidence readings.

According to Credit Agricole; “Key for market participants would be any indications from the activity data that the UK economy has turned a corner at the start of 2026.

Lloyds Bank considered the technical outlook; “there is congestion to clear, but the tone is much improved. We’d be thinking about adding back longs on any dip towards 0.8670/0.8700.” (GBP/EUR selling in the 1.500-1.1530 range).

ING is still concerned over the political outlook; “Potential flashpoints are the performance of the Labour Party in a by-election on 26 February and local elections on 7 May. His departure and that of his Finance Minister, Rachel Reeves, would hit sterling and Gilts.”

The latest UK growth data was slightly weaker than expected with a 0.1% GDP increase for the fourth quarter. Markets remain confident that the Bank of England (BoE) will cut interest rates.

ING commented; “In terms of the BoE trajectory, we think it will have enough evidence to cut rates to 3.50% on 19 March. Inflation data should then fall even faster in 2Q.” The bank expects a further cut at the June meeting, undermining yield support.

Goldman Sachs maintains a negative stance on the currency; “the Bank’s more dovish reaction function and faster disinflation progress have important implications for the currency, especially with political uncertainty rising again.”

Morgan Stanley also expects the Pound to lose ground; “We continue to recommend EUR/GBP longs via limited loss structures amid a continued UK yield curve steepening reflecting both increased term premium around fiscal policy and a more dovish BoE.”

Credit Agricole takes a different view and considers that pessimism may be overdone; “In all, we continue to think that UK rates markets have a relatively dovish outlook on the BoE and that, therefore, many negatives are in the price of the GBP.”

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TAGS: Pound Euro Forecasts