British Pound to Euro Forecast: Best GBP Buying Levels but UK Risks Loom

Modified: Tuesday, 10 March 2026 13:01 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: Best GBP Buying Levels but UK Risks Loom

The Pound to Euro exchange rate (GBP/EUR) climbed to five-week highs near 1.1580 as a surge in global energy prices weighed heavily on the Euro and triggered sharp volatility across financial markets.

While Sterling has gained ground amid the Euro’s vulnerability to rising oil and gas costs, analysts warn the UK economy also faces mounting risks from higher bond yields and energy-driven inflation, leaving the medium-term outlook for the Pound uncertain.

GBP/EUR Forecasts: Medium-Term UK Fears

The Pound to Euro (GBP/EUR) exchange rate strengthened to 5-week highs around 1.1580 on Monday before a retreat to near 1.1540 with trading conditions inevitably very volatile amid the surge in energy prices and slide in equities.

The Pound overall has been resilient against the Euro amid Euro-Zone economic fears, but a sustained jump in energy costs and yields would trigger major stresses in the UK economy.

Bond yields have spiked higher and there has also been a dramatic shift in Bank of England expectations while UK fiscal policy will also come into greater focus.

Fears surrounding energy supplies from the Middle East have intensified during the weekend. Brent crude spiked 20% to near $120 p/b and the highest level since 2022 before trading around $102 p/b. UK gas prices also jumped over 15% on the day.

The Euro and Pound are both vulnerable on higher energy prices with markets monitoring the relative outlook.

Kathleen Brooks, research director at XTB commented; “The UK is paying more for natural gas than our European neighbors, so it is natural that our bond market sell off could be worse than Europe’s today.”

Higher energy prices will put upward pressure on inflation and there has been a shift in Bank of England expectations.

On a short-term view, ahead of the Iran war, markets were pricing in over an 80% chance of a rate cut in March, but are now pricing in a 99% chance of no change.

Longer-term, expectations of two rate cuts this year have morphed into a chance that rates will have to be increased. Markets also now see an increased potential for the ECB to hike rates.

Potential damage to UK and Euro-Zone economies will also be a key factor.

ING commented; “The morning has already seen markets begin to price in rate hikes by the ECB and the Bank of England. But that seems odd given the major hit to consumer spending that is about to make itself felt – this is a supply-driven shock, not some huge surge in demand. Policymakers may well have learned the wrong lesson from 2021, and risk setting off a much deeper recession if they get too trigger-happy on rate hikes.”

There have also been sharp moves across bond markets with the UK 10-year yield jumping to 5-month highs above 4.70%.

The 2-year yield also surged 37 basis points to near 4.25%, the sharpest one-day increase since the infamous Truss mini budget in 2022.

The jump in yields and threat of a dip in activity will have important implications for UK fiscal policy with weaker revenue and higher debt-interest costs.

There will also be pressure for the government to alleviate any jump in domestic energy costs, intensifying fiscal pressure.

Jordan Rochester, head of fixed-income strategy EMEA at Mizuho Bank, commented; “the problem now is how much this will cost governments with energy support packages being floated as ideas."

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TAGS: Pound Euro Forecasts