British Pound to Euro Forecast: GBP Slips as Central Bank Uncertainty Grows

Published: Tuesday, 31 March 2026 11:00 BST - Written by Frank Davies

STORY LINK British Pound to Euro Forecast: GBP Slips as Central Bank Uncertainty Grows

The Pound to Euro exchange rate (GBP/EUR) dipped to three-week lows near 1.1510 before stabilising, as rising economic concerns and shifting central bank expectations weighed on Sterling.

While easing expectations for an imminent ECB rate hike offered some support, growing fears over a prolonged energy shock and its impact on the UK economy continue to pressure the Pound.

GBP/EUR Forecasts: Dips to 3-Week Lows

The Pound to Euro rate dipped to 3-week lows at 1.1510 before a slight recovery to 1.1525 with less confidence in an ECB rate hike curbing Euro demand later in the session.

Unease over the implications of the Middle East conflict has had a growing impact.

Nomura maintains a GBP/EUR target of 1.1170.

UK equities posted gains on Monday and the immediate bond-market selling eased early on Monday with the 10-year yield trading below 4.90%

There are, however, concerns over the growing spectre of damage to the UK economy and there have been reports that UK funds have had to increase hedging ratios on government debt..

Bank of America commented; “We think the "short-term" conflict narrative has been replaced with a concern that the conflict is likely to be more protracted. As a result, we believe that markets are transitioning towards a risk-off/cyclical macro environment.”

As far as data is concerned, mortgage approvals for February were stronger than expected with an increase to 62,600 from a revised 60,250 the previous month and above consensus forecasts of 61,000.

Official data, however, will not reflect the jump in market interest rates. Higher fuel prices will provide a net boost to government revenue, but there will be pressure for fiscal support for consumers and weaker activity will also hurt the budget.

According to Barclays; “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 with the upcoming May local elections.”

There are no major data releases during the week with the bond market watched very closely.

The EU business and consumer survey recorded a decline to 96.6 for March from 98.2 the previous month, in line with market expectations.

ECB expectations will also have a significant impact on the Euro with markets less confident that the central bank will take early action.

ING commented; “Its pricing has recently dropped from 85% to 50% in part because of ECB commentary. On Friday, the ECB's Isabal Schnabel said the ECB should not rush its response to developments, nor overreact.”

Scotiabank added; “President Lagarde said the scale of the shock is probably beyond imagination at this point, suggesting that the central bank will not act precipitously on rates before it can fully assess developments.”

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TAGS: Pound Euro Forecasts