Pound-to-Euro Week Ahead Forecast: Best GBP Levels in Play

Modified: Monday, 9 March 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Week Ahead Forecast: Best GBP Levels in Play

The Pound to Euro exchange rate (GBP/EUR) climbed above 1.1550 to one-month highs as shifting Bank of England rate expectations and position adjustments supported Sterling despite heightened geopolitical tensions.

Rising energy prices following escalating conflict in the Middle East have complicated central-bank policy expectations, prompting markets to reconsider the timing of Bank of England rate cuts while the Euro faces pressure from Europe’s dependence on energy imports.

GBP/EUR Forecasts: BoE rethink?

After initial vulnerability, UBS expects that the Pound to Euro (GBP/EUR) exchange rate will strengthen to 1.1630 by the first quarter of 2027.

MUFG, in contrast, still forecasts that GBP/EUR will slide to 1.11 by the end of 2026.

Middle East developments dominated during the week with a surge in energy prices as the US and Israel attacked Iran aggressively while Iran retaliated with missile strikes across the region.

GBP/EUR was broadly resilient and a break above 1.1500 triggered a 1-month high above 1.1550. There was clear evidence of position adjustment with a covering of short Pound positions while the Euro was hit by a liquidation of long positions.

A shift in Bank of England expectations also underpinned the Pound with expectations that the Bank of England would decide not to cut rates this month due to elevated uncertainty.

Nomura has been notably bearish on the Pound, but has tempered its short-term view; “The risk now is that the market finds it relatively easy to price out BoE rate cuts, but the hurdle to pricing in meaningful rate hikes in the euro area is higher. Indeed, the two-year swap spread has moved from just under 120bp in GBP’s favour to nearly 130bp in the last few days.”

It noted; “This has overwhelmed any potential relative “safe haven” demand for EUR relative to GBP, which is often seen when global equities are under pressure.”

The bank added; “if energy prices stay elevated. In the short term, EUR may face slightly more pressure than GBP from these forces.”

UBS has a positive medium-term Pound outlook; “We expect the pound to recover in the second half of this year and into 2027—especially given its current undervaluation—as the political landscape becomes clearer after the May elections and the BoE nears the end of its easing cycle.”

Natixis sees the risk of near-term Pound selling; “In the short term, EUR/GBP could move back above 0.88 (GBP/EUR below 1.1360), especially ahead of the local elections on May 7, which risk adding another layer of political uncertainty.”

UBS does have reservations over the near-term Pound outlook; “With local and regional elections scheduled for May and monetary easing likely to continue through to June, we don't expect sterling to outperform in the near term. Meanwhile, Europe’s recovery is gaining momentum, with increased fiscal spending in defense-related sectors starting to show.”

MUFG expects rate cuts will be delayed rather than cancelled; “We assume the BoE will hold off from a cut this month due to higher energy prices stemming from Middle East risks, before delivering two further cuts in Q2 and Q3.”

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TAGS: Pound Euro Forecasts