Pound to Euro Week Ahead Forecast: Downside GBP Risks Build

Modified: Tuesday, 7 April 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: Downside GBP Risks Build

The Pound to Euro exchange rate (GBP/EUR) slipped to four-week lows below 1.1450, as markets questioned Bank of England rate-hike expectations and reassessed the UK’s economic outlook.

With yields retreating and policymakers pushing back against tightening bets, Sterling faces growing downside risks, especially as the European Central Bank turns more alert to inflation pressures.

GBP/EUR Forecasts: BoE protest

MUFG is forecasting Pound to Euro (GBP/EUR) exchange rate losses to 1.11 by the first quarter of 2027.

Credit Agricole notes short-term Pound risks, but expects net gains to 1.1630 by the end of this year.

Yields and economic developments are likely to be key elements. According to MUFG; “We are unconvinced that the yield support for the pound will continue and suspect either a more intense period of risk-off as global equity markets fall or de-escalation that will see yields decline further. Either way, the period ahead could see a reversal of the outperformance of the pound within the G10 space.”

Credit Agricole commented; “The GBP looks cheap vs the EUR based on relative real rate differential and relative sovereign credit risk spread.”

During the week, GBP/EUR dipped to 4-week lows below 1.1450 before attempting to stabilise amid further underlying volatility. The Pound was undermined by a fresh dip in risk appetite and concerns over the UK economy while yields retreated.

There are no major UK data releases during the week, but markets will be looking to assess high-frequency data to assess whether the jump in energy prices is having a negative impact.

Bank of England (BoE) pricing will be important. During the week, Governor Bailey cast doubts on market pricing; “(The market)'s still pricing us to raise rates. I would still say that is a judgment markets have to make but I think they're getting ahead of themselves.”

ING commented; “We are in Andrew Bailey’s camp with the view that a growing output gap and weak pricing power mean that there are limited chances of second-round effects from this energy supply shock. We suspect the market can further rein in the near 50bp of expected BoE tightening this year. If so, EUR/GBP could make its way back to the 0.8790/8800 area – where it was trading at the end of February.” (1.1360 for GBP/EUR).

As far as theEuro-Zone is concerned, inflation increased to 2.5% for March from 1.9% previously, but slightly below forecasts of 2.6% while the core rate edged lower to 3.3% from 2.4%.

Markets are backing an April ECB rate hike. ING commented; “Say goodbye to the ECB's good place. After a long period of eerily stable inflation despite global disruption, eurozone inflation has once again shot up thanks to the surge in energy prices.”

It added; “The longer the disruption lasts, the greater the likelihood of broader increases in headline and core inflation. With much uncertainty around how the Middle East conflict will evolve, many scenarios for inflation remain possible, and that's why the ECB is right to be on high alert.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts