Pound-to-Euro Forecast: BoE Caution, Weak Economic Outlook Weigh on GBP

Modified: Friday, 17 April 2026 08:11 BST - Written by David Woodsmith

STORY LINK Pound-to-Euro Forecast: BoE Caution, Weak Economic Outlook Weigh on GBP

The Pound to Euro exchange rate (GBP/EUR) has slipped back below 1.1500, trading near 1.1470 on Friday, as markets look past stronger-than-expected UK GDP data and refocus on underlying economic risks.

Sterling momentum has faded in recent sessions, with concerns over the UK outlook and Bank of England policy limiting upside and keeping GBP/EUR near the lower end of its recent range.

GBP/EUR Forecasts: Held Close to 1.15

The Pound failed to derive significant support from stronger than expected UK GDP data and the Pound to Euro (GBP/EUR) exchange rate has consolidated just above the 1.1500 level.

Risk appetite held firm which helped protect the Pound, but markets were focussing on the UK outlook amid expectations of significant damage from the jump in energy prices, although the impact is difficult to quantify.

Despite short-term vulnerability, RBC Capital Markets sees scope for GBP/EUR gains to 1.1630 by year-end.

The ONS estimated UK GDP growth of 0.5% for February compared with consensus forecasts of 0.1% with the January estimate revised up to 0.1% from 0.0% reported previously.

ING commented; “UK output surged in February, but it's in line with a trend dating back to 2022, where growth is stronger in the first quarter than across the rest of the year. We're taking this latest data with a pinch of salt.”

Sanjay Raja, Deutsche Bank’s chief economist, noted the mixed outlook; “The good news is that the UK likely entered the energy shock on a stronger footing than many expected. The bad news is that upward GDP momentum won’t last. This will likely be the growth before the energy squeeze.”

Bank of England (BoE) policy will remain a key element. Governor Bailey pointed out that growth will be weaker while inflation will be higher which will cause major complications for the bank

According to Bailey; “There's really difficult judgments to be made."

He did preach patience; "We're not going to rush to judgments on those things, because there are a lot of uncertainties around this, not just how it's going to play out, but also how it's going to pass through into the UK economy."

These are similar comments to MPC member Greene and suggest the bank will not want to make a move in April.

MUFG commented; “there has been some back tracking from both the BoE and ECB suggesting that they want to take more time to assess the fallout from the energy price shock before hiking rates.”

ING added; “we’re still not convinced the Bank of England will hike rates this year. It’s a close call, which becomes closer still if the disruption hasn’t materially improved by the time of the June meeting. But for now, we’re looking for rates to stay unchanged at 3.75% throughout 2026.”

MUFG expects that the ECB will hike rates twice this year which will support the Euro.

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TAGS: Pound Euro Forecasts