British Pound to Euro Forecast: GBP Falls as Rate-Hike Bets Fade

Modified: Thursday, 2 April 2026 10:31 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Falls as Rate-Hike Bets Fade

The Pound to Euro exchange rate (GBP/EUR) dropped to four-week lows below 1.1450, as markets reassessed expectations for Bank of England rate hikes and shifted toward a more cautious outlook for Sterling.

With weaker UK data, falling energy prices, and increasingly hawkish European Central Bank rhetoric, the balance of risks is tilting against the Pound in the near term.

GBP/EUR Forecasts: Slides to 4-Week Lows

The Pound to Euro (GBP/EUR) exchange rate posted sharp losses on Tuesday and dipped to 4-week lows below 1.1450 on Wednesday before attempting to stabilise.

ING expects further GBP/EUR losses to 1.1360 amid hawkish ECB rhetoric and a shift in Bank of England (BoE) expectations as oil prices declined.

Credit Agricole still sees gains to 1.1630 by the end of 2026.

Last week, markets were pricing in three BoE rate hikes by the end of this year, but this has now shifted to pricing in less than two rate hikes.

The UK PMI manufacturing index was revised to 51.0 for the final March reading from the flash reading of 51.4 and 51.7 in February. The headline figure was also artificially inflated by a jump in delivery times.

Rob Dobson, Director at S&P Global Market Intelligence commented; “UK manufacturing output contracted for the first time in six months in March. The acceleration in input price inflation was the steepest since the aftermath of the UK's withdrawal from the ERM in 1992.

He added; “The darker economic and geopolitical backdrop is also weighing on business confidence and hiring trends. Optimism about the year ahead has slumped to a six-month low and the latest round of job cuts is the deepest since last September.”

MUFG sees UK economic vulnerability; “With risk aversion potentially set to rise as global growth fears increase and given the vulnerability of the UK to a bigger terms of trade hit and potentially fuel shortages, the pound could be set to reverse its relative resilience seen in March.

It added; “If this renewed optimism translates to sharp falls in energy (a big if at this stage) the surge on front-end yields will likely reverse and reinforce a potential correction for the pound.”

ING considers two domestic factors will drag UK yields down faster than the Euro area. It notes; “First, the BoE was ready to cut before the war started. Second, the growth impact on the UK from the energy shock is expected to be the largest among OECD countries – a dovish argument.”

According to ECB council member Dolenc; “The euro zone economy may already be on the "adverse" path outlined by the European Central Bank and inflation could become entrenched quicker than in 2022.”

ING noted relatively hawkish rhetoric from ECB officials and added; “These comments raise the chances that EUR front-end rates will prove sticky on the way down, as markets may require some dovish comments from the ECB to price out hikes even if oil prices keep declining.”

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TAGS: Pound Euro Forecasts