British Pound to Euro Forecast: GBP Faces ‘Lose-Lose’ on Yields, Growth Risks

Modified: Friday, 10 April 2026 08:41 BST - Written by Frank Davies

STORY LINK British Pound to Euro Forecast: GBP Faces ‘Lose-Lose’ on Yields, Growth Risks

The Pound to Euro exchange rate (GBP/EUR) slipped back below 1.1500 after failing to sustain gains, as fading confidence in the Iran ceasefire and rising oil prices undermined risk appetite.

Sterling remains vulnerable to shifting energy dynamics, with markets warning of a potential “lose-lose” scenario where either falling yields or renewed economic fears limit further upside.

GBP/EUR Forecasts: Trades Below 1.15

The Pound to Euro (GBP/EUR) exchange rate peaked just above 1.1510 on Wednesday amid a strong boost to risk appetite, but retreated to 1.1480 on Thursday with risk conditions less robust.

There is also the risk of a lose-lose situation for the Pound as either yields will decline as energy prices fall or fears over the economy will escalate if energy prices are subjected to renewed upward pressure.

ING is still backing GBP/EUR declines to 1.1360 as it expects a lack of pricing power will discourage any Bank of England rate hikes.

ABN AMRO sees scope for GBP/EUR gains to 1.1670 by the end of this year.

Confidence in the US-Iran cease-fire has faded while the Strait of Hormuz situation remains notably unclear. Oil prices posted renewed gains with Brent trading above $96.0 p/b while equities lost ground.

ING considers that the Pound gains were driven primarily by a strong boost to risk appetite amid relief over the cease-fire in Iran.

If risk conditions deteriorate sharply again, then the Pound is likely to register renewed losses.

There was also fresh selling in the UK bond market with the 10-year yield around 4.72% from Wednesday’s close at 4.65%.

Developments in the UK economy will be watched closely, although there will be a lag before official data picks up any significant impact.

GDP data due next week will be for February and will not, therefore, reflect any impact from the Iran war. Weak data, however, would spark additional concerns over the outlook.

Rhetoric from ECB officials will also continue to be monitored closely.

According to ING; “EUR rate expectations may prove sticky, while Bank of England dovish repricing could come through more smoothly if energy prices keep declining. After all, the BoE was already ready to cut before the war began, and we have a conviction view that second‑round effect risks in the UK are significantly lower than in 2022.”

CIBC considers that underlying Pound fundamentals remain vulnerable; “Given the UK’s high-beta status, dependence on foreign inflows to cover a substantive current account shortfall and/or reliance on foreign energy and food imports, notably LNG from Norway, underlines ongoing external challenges.”

In this context, Middle East and trade trends will be watched very closely.

CIBC added; “Sterling’s fortunes remain tied to energy price dynamics and hence the duration of hostilities. The greater the scale of economic destruction, the greater the risk of immediate GBP downside.”

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TAGS: Pound Euro Forecasts