Pound to Euro Election Risk

Modified: Thursday, 26 February 2026 20:31 BST - Written by David Woodsmith

STORY LINK Pound to Euro Election Risk

The Pound to Euro (GBP/EUR) exchange rate moved lower on Thursday as investors grew cautious amid rising political uncertainty in the UK.

At the time of writing, GBP/EUR was trading close to €1.1452, down approximately 0.2% compared with Thursday’s opening levels.

Sterling struggled to attract demand as attention centred on the Gorton and Denton by-election in Greater Manchester.

The vote has become a focal point for markets, with polling indicating a tightly contested race that could carry broader political implications for Prime Minister Keir Starmer. A disappointing showing for Labour in what has historically been considered a safe seat risks intensifying scrutiny of his leadership.

Investors are increasingly concerned that losing the constituency could strengthen internal opposition within the party and raise the likelihood of a leadership challenge following May’s local elections.

With the outcome viewed as highly uncertain, many GBP traders opted to remain on the sidelines, limiting support for the currency.

The Euro traded in a relatively stable manner following comments from European Central Bank President Christine Lagarde.

Addressing the European Parliament’s Economic and Monetary Affairs Committee, Lagarde reiterated that policymakers expect inflation across the Eurozone to return sustainably to the ECB’s 2% target over the medium term. Her remarks reinforced expectations that the central bank is comfortable maintaining its current policy stance for now.

Lagarde also stressed that future interest rate decisions will continue to depend on incoming economic data and evolving inflation risks, helping to anchor sentiment toward the single currency.

Short-Term GBP/EUR Forecast: By-Election Outcome in Focus

The direction of the Pound to Euro exchange rate is likely to hinge on the outcome of the Gorton and Denton vote.

A Labour defeat could weigh heavily on Sterling by reviving doubts surrounding Starmer’s political position and adding fresh uncertainty to the UK outlook.

For the Euro, attention will shift to Germany’s latest inflation release at the end of the week. Forecasts suggest price growth may ease slightly to around 2%, aligning with the ECB’s target and supporting expectations that policymakers will refrain from making near-term adjustments to interest rates.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts