Pound to Euro Week Ahead Forecast: GBP Short Selling Risk

Modified: Monday, 30 March 2026 07:01 BST - Written by Tim Boyer

STORY LINK Pound to Euro Week Ahead Forecast: GBP Short Selling Risk

The Pound to Euro exchange rate (GBP/EUR) remained contained below 1.1550, with markets adopting a cautious stance as investors await clearer signals on inflation and central bank policy.

While short-term moves have been driven by volatile energy prices and geopolitical headlines, underlying concerns over UK economic fragility continue to limit Sterling’s upside potential.

GBP/EUR Forecasts: Inflation watch

Barclays sees the risk of selling in the short term, but is forecasting a net gain in the Pound to Euro (GBP/EUR) exchange rate to 1.1630 at the end of 2026 as fundamentals stay solid.

Danske Bank, however, expects fragile UK fundamentals will dominate and has a 12-month GBP/EUR forecast of 1.1360.

GBP/EUR has traded in relatively narrow ranges during the week, but settled below 1.1550 despite sharp moves across other asset classes.

Developments surrounding the Middle East conflict and trends in energy prices will be a key short-term element while the economic impact and relative performance will be a growing focus.

Oil prices dipped sharply after comments from the US Administration that talks were being held with Iran and that attacks on energy infrastructure had been delayed.

Iran denied that peace talks were taking place while there were reports that the US was sending additional troops to the Middle East with a possible move to take control of Iranian energy infrastructure. Brent traded above $100 p/b on Friday.

Danske Bank commented; “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. This poses a risk to our call of a weaker GBP the coming year combined with GBP performing in a USD positive environment.”

Monetary policy will also be a crucial element as central banks have to manage the contradictory forces of weaker growth and upward pressure on inflation.

Markets are pricing in over a 60% chance of an April Bank of England (BoE) rate hike and are backing an ECB hike.

Danske Bank is not convinced that the BoE will hike rates given the UK economic outlook; “we highlight that the UK economy remains fragile and that we see scope for the significant repricing of the BoE to revert to a larger extent than for the ECB, opening up for a move higher in EUR/GBP.”

Barclays noted the short-term Pound risks; “Geopolitical developments have pushed UK politics to the background, but risks of a more expansionary fiscal policy have likely risen in the wake of the energy shock and the upcoming May local elections. Accordingly, we pencil in a modest re-widening of the GBP's risk premium in Q2.”

According to Goldman Sachs the Pound will lose ground over the medium term; “while Sterling resilience could extend further, we ultimately do not think the currency has been relieved of the medium-term headwinds that should come back into play in the months ahead.”

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TAGS: Pound Euro Forecasts