Pound to Euro Week Ahead Forecast: 1.16 Resistance Looms

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

STORY LINK Pound to Euro Week Ahead Forecast: 1.16 Resistance Looms

The Pound to Euro exchange rate (GBP/EUR) struggled to hold gains near six-month highs around 1.16 as soaring energy prices and shifting interest-rate expectations drove volatile trading.

Sterling found support from sharply higher UK bond yields and markets abandoning expectations of a near-term Bank of England rate cut, although analysts warn the rally could stall if geopolitical tensions ease or UK economic concerns intensify.

GBP/EUR Forecasts: BoE’s Bailey in the highlights

ING expects the Pound to Euro (GBP/EUR) exchange rate will hit strong resistance on any gains to around 1.1630 amid a surge in energy prices and dramatic shift in interest rate expectations.

GBP/EUR touched the 1.1600 level during the week and close to 6-month highs before a retreat to 1.1570.

The Euro was hurt by a surge in energy prices while higher UK yields boosted the Pound, although support was tempered by the slide in risk appetite.

Developments in the Iran conflict and energy prices will remain extremely important with the Bank of England (BoE) and ECB meetings also very important in the week ahead.

Brent crude spiked to highs near $120 p/b and held close to $100 late in the week. The straits of Hormuz effectively remain closed for shipping which has triggered a sharp drop in global oil supply. The IEA move to release 400mn barrels in strategic reserves had only limited impact.

There will be a negative economic impact on both the UK and Euro-Zone. The Euro is particularly sensitive to higher energy prices given the dependence on imported energy.

ING expects the impact will be less severe than following the 2022 Russian invasion of Ukraine; “The disruption to LNG flows from the Persian Gulf is sizeable, but it’s expected to be temporary rather than the structural break Europe faced when Russian pipeline gas collapsed. Also, global gas markets are better supplied and EU gas demand sits well below pre‑war levels.”
A key element during the week has been a shift in Bank of England (BoE) expectations.

Markets are now ruling out any chance of a rate cut at the meeting in the week ahead. Importantly, there are now major doubts whether the bank will be able to cut rates at all this year with traders pricing in around an 80% chance that rates will be increased by the end of this year.

UK bond yields have also moved sharply higher with the 10-year yield at 6-month highs above 4.70%

Higher yields will continue to offer some short-term support to the Pound, although there will be concerns over the medium-term impact on both the economy and government finances as debt interest costs increase.

In this context, the disappointing GDP data with no growth for January will sap confidence.

ING is not convinced that this shift in BoE expectations is justified; “Our concern remains that markets have priced out BoE easing too aggressively. The two-year GBP swap rate has jumped 50bp since the Iran conflict started. Any positive surprises on the de-escalation front carries meaningful EUR/GBP upside risk, in our view.”

The bank added; “Our valuation metrics also suggest a [EUR/GBP] move below 0.860 would be rather stretched unless markets start to seriously price in a rate hike by the BoE.”

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TAGS: Pound Euro Forecasts