Pound to Euro Forecast: GBP/EUR Fails at 1.16 Ahead of BoE Decision

Modified: Tuesday, 17 March 2026 13:16 BST - Written by Frank Davies

STORY LINK Pound to Euro Forecast: GBP/EUR Fails at 1.16 Ahead of BoE Decision

The Pound to Euro exchange rate (GBP/EUR) struggled to sustain gains above 1.16, slipping back toward 1.1565 as markets turned cautious ahead of key Bank of England and ECB policy decisions.

With energy prices elevated and rate-cut expectations shelved, traders are bracing for central bank guidance that could shape near-term Sterling direction amid ongoing geopolitical uncertainty.

GBP/EUR Forecasts: Unable to Hold 1.16

The Pound to Euro (GBP/EUR) exchange rate has again stalled in the 1.16 area and retreated to 1.1565 on Monday amid a tentative Euro recovery and soft Pound tone.

According to SocGen, any break above 1.1610 could lead to GBP/EUR gains to at least 1.17.

There has been some relief in the UK bond market with the 10-year yield retreating to 4.70% from 4.77% on Friday, but the position remains notably fragile.

Energy prices will remain a key element with the Euro and Pound both vulnerable to higher energy costs while there will be bond-market implications.

According to Danske Bank; “While the UK is still a net-energy importer akin to the euro area, the energy mix in the UK slightly favours a relatively stronger GBP vs EUR.”

Monetary policy will also be very important this week with the Bank of England (BoE) and ECB both holding policy meetings on Thursday. Statements and rhetoric from both, together with the relative outlook, will be crucial for GBP/EUR moves.

Expectations of a BoE rate cut have been abandoned amid the Iran conflict.

Danske Bank expects no change this week; “We expect the BoE to keep the Bank Rate at 3.75% on Thursday, putting the cutting cycle on pause and highlighting the elevated uncertainty and wide outcome space.”

According to MUFG; “The BoE is likely to express more concern over persistent inflation risks again due to higher energy prices which has reduced scope for further rate cuts.”

SocGen pointed to the high degree of uncertainty; “The key question of how persistent the current energy shock will be means the MPC will be flying as blind as the rest of us."

It added; "Given this uncertainty, we expect the MPC to remain on hold in a unanimous vote, and the easing bias in the guidance is likely to be dropped."

Danske still sees rate cuts later this year; “While the uptick in energy prices poses a risk to the call of the cutting cycle to continue, we expect the BoE to resume cutting again later this year, which should provide headwinds for GBP.”

The ECB is also expected to hold the deposit rate at 2.00% this week.

According to ING; “The ECB is set to keep policy unchanged, but the recent surge in oil prices and the escalating conflict in the Middle East mean any discussion of rate cuts is off the table.

It added; “Expect a firmer, more hawkish tone, with strong emphasis on vigilance and a willingness to act if second‑round pressures re‑emerge.”

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TAGS: Pound Euro Forecasts