British Pound to Euro Forecast: Energy Shock and Weak Data Weigh on GBP

Published: Wednesday, 1 April 2026 09:30 BST - Written by Ben Hughes

STORY LINK British Pound to Euro Forecast: Energy Shock and Weak Data Weigh on GBP

The Pound to Euro exchange rate (GBP/EUR) slipped below 1.1500 to three-week lows, as growing doubts over UK economic resilience weighed on Sterling.

Although easing bond yields and stronger equities provided some support, rising energy prices and concerns over growth and fiscal pressures continue to cloud the Pound’s outlook.

GBP/EUR Forecasts: 3-Week Lows

Nomura maintains a negative stance on the Pound with an end-2026 target of 1.10.

There was some relief in financial markets as the FTSE 100 index posted significant gains while the 10-year bond yield retreated towards 4.80% and this combination helped underpin the Pound.

The jump in oil prices will continue to have an important impact on the UK and Euro-Zone.

According to BNP Paribas; "Both the UK and the euro zone import more energy than they produce, so a supply-driven shock weakens each currency through terms-of-trade and growth channels, reducing household spending,"

There are, however, increasing reservations surrounding the UK outlook. BNP added; "as the market prices in the growth and fiscal impact of the energy shock in addition to the terms of trade impact."

MUFG added; “the recent resilience of GBP, supported by a sharp move higher in UK yields, is also unlikely to last”

Nomura also maintains a negative stance on the Pound as it expects the Bank of England (BoE) will decide against rate hikes.

According to Nomura; “for the BoE, we think the market pricing is excessive, since wage growth is decelerating and already-restrictive policy rates provide scope to manage inflation while maintaining current settings.”

Nationwide reported an increase in house prices of 0.9% for March compared with consensus forecasts of no change with the annual increase at 2.2% from 1.0%.

Bank Chief Economist Robert Gardner commented; “The pickup in house price growth suggests that the market had regained momentum after the slowdown recorded around the turn of the year. However, the sharp rise in global energy prices in response to developments in the Middle East represents a significant shock to the global economy, clouding the outlook.”

As far as the Euro-Zone is concerned, the headline inflation rate increased to 2.5% for March from 1.9% previously, but slightly below consensus forecasts of 2.6% while the core rate edged lower to 2.3% from 2.4%.

There is notable uncertainty whether the ECB will hike rates in April and a dip in expectations could undermine the Euro.

According to ING; "We find it hard to see the ECB moving at the next meeting at the end of April unless the ghosts of 2022 are really keeping policymakers awake at night."

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TAGS: Pound Euro Forecasts