British Pound to Euro Forecast: "Best Buy" Narrative Tested by Growth Risks

Modified: Thursday, 16 April 2026 07:31 BST - Written by James Fuller

STORY LINK British Pound to Euro Forecast: "Best Buy" Narrative Tested by Growth Risks

The Pound to Euro exchange rate (GBP/EUR) slipped back towards 1.1500 after failing to hold two-week highs above 1.1520, as markets reassessed the UK economic outlook and Bank of England policy.

Sterling’s recent resilience has attracted best-buy interest, but with growth forecasts downgraded and key data looming, investors are increasingly cautious over whether GBP/EUR can hold gains or drift lower towards the 1.14 area.

GBP/EUR Forecasts: Retreat from 2-Week Highs

The Pound to Euro (GBP/EUR) exchange rate peaked just above 1.1520 on Tuesday before a retreat to 1.1500 on Wednesday as markets considered the UK economic outlook and Bank of England (BoE) policy.

High yields have underpinned the Pound, but the IMF downgrade and frustration expressed by Chancellor Reeves will ensure a stronger focus on the UK outlook. The latest GDP data is due on Thursday with the inflation and labour-market data next week.”

Scotiabank commented; “Sterling's resilience will ultimately depend on both how quickly energy disruptions resolve and whether the MPC can credibly maintain an easing bias amid lingering

inflation uncertainty.”

According to ING; “All in all, the latest developments keep us confident with our call that front-end rates have further to fall in the UK than the eurozone and that should offer lasting support to EUR/GBP beyond the near-term.” (GBP/EUR selling)

It added; “For now, the pair is suffering a bit from improved risk sentiment, but rate differentials will return as primary drivers once the dust has settled.”

The bank is still backing GBP/EUR losses to 1.1360 and Goldman Sachs is forecasting losses to this level on a 6-month view.

BoE policy will remain a key element with rhetoric watched closely as the bank grapples with weaker growth and higher inflation.

There will inevitably be pressure on the UK economy with the OECD and IMF both now forecasting that 2026 GDP growth will be below 1.0%.

On Tuesday MPC member Greene commented; “We can't wait to have all the definitive data showing that there are second-round effects because then we will be too late already, so it will have to be a judgment call.”

At this stage, markets are not backing an April BoE rate hike.

There will also be an impact on government borrowing with Chancellor Reeves expressing frustration at the situation.

In an interview Reeves commented; "This is a war that we did not start. It was a war that we did not want. I feel very frustrated and angry that the US went into this war without a clear exit plan, without a clear idea of what they were trying to achieve.”

The UK GDP data for February will be released on Thursday. Consensus forecasts are for 0.1% GDP growth for the month after no change for January. Weaker than expected data would increase unease over the Iran impact while stronger than expected data would provide an element of relief.

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TAGS: Pound Euro Forecasts