British Pound to Euro Forecast: GBP Firms on Hawkish BoE

Modified: Thursday, 26 March 2026 14:16 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Firms on Hawkish BoE

The Pound to Euro exchange rate (GBP/EUR) is holding around 1.1550, supported by increasingly hawkish Bank of England rhetoric even as concerns over the UK economic outlook persist.

While rate-hike speculation has helped underpin Sterling in the short term, uncertainty over energy prices and the broader impact of the Middle East conflict continues to limit confidence in sustained gains.

GBP/EUR Forecasts: 1.1550

The Pound to Euro (GBP/EUR) exchange rate is trading close to 1.1550 with hawkish Bank of England (BoE) comments offsetting unease over potential damage to the economy.

BoE talk, energy prices and the UK bond market will remain crucial elements for Sterling.

BoE chief economist Pill considers that action is necessary to raise interest rates and ING noted; “Comments today from Megan Greene could potentially position her for voting for an April rate hike as well. An April 25bp BoE hike is now 72% priced. We doubt that will be delivered, but we would not fight this trend today.”

The bank sees scope for a near-term GBP/EUR challenge on 1.16 and above, but still expects medium-term Pound losses.

Barclays has a year-end GBP/EUR forecast of 1.1630.

Both the BoE as a whole and markets will be waiting for further evidence on Iran developments and the potential impact on the economy.

According to Pill; "I see the upside risks to price ​stability mounting as a result of events in the Gulf." He added; "The fog of uncertainty in which we always operate ​cannot be an excuse for inaction.”

The BoE majority may prove to be more cautious. Monex head of macro research Nick Rees commented; "More data is needed to assess both the magnitude of the impact and the likely pass-through of higher energy costs to broader inflation."

He added; "Absent that, we expect rate-setters to remain in wait-and-see mode, with the April PMIs likely to be a key watch ahead of the next round of monetary policy decisions.”

According to Handelsbanken, FX strategist Tommy von Brömsen; "The persistence of the shock will determine how much this will feed into UK households and firms."

He added; "If this (the Middle East conflict) goes on for a few more weeks, then maybe the UK stands to lose more than others and that will be pound negative.”

The headline UK inflation rate held at 3.0% for February, in line with consensus forecasts while the core rate edged higher to 3.2% from 3.1% and compared with expectations of no change at 3.1%.

The goods inflation rate was unchanged at 1.6% while the services-sector rate edged lower to 4.3% from 4.4%.

ING commented; “At current energy prices, UK inflation is set to peak between 3.5-4% this autumn. That's around a percentage-point higher than we'd expected pre-war, not exactly a game-changer for a central bank that was on the verge of cutting rates this month. Clearly, we can't rule out rate hikes if energy prices spike further, but our base case is a pause throughout 2026.”

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TAGS: Pound Euro Forecasts