Pound to Euro Week Ahead Forecast: GBP Slips on Starmer Pressure

Modified: Monday, 20 April 2026 07:01 BST - Written by Frank Davies

STORY LINK Pound to Euro Week Ahead Forecast: GBP Slips on Starmer Pressure

The Pound to Euro exchange rate (GBP/EUR) has retreated to around 1.1470, pulling back from weekly highs near 1.1520, as political uncertainty and a weaker UK outlook undermine Sterling sentiment.

With concerns mounting over Prime Minister Starmer’s leadership and fading Bank of England rate hike expectations, markets are increasingly cautious over whether GBP/EUR can hold above the 1.14 level.

GBP/EUR Forecasts: Starmer trouble

Danske Bank forecasts Pound to Euro (GBP/EUR) exchange rate losses to 1.1240 on a 6-month view.

RBC Capital Markets notes short-term risks, but sees scope for gains to 1.1630 at the end of 2026.

GBP/EUR hit highs at 1.1520 during the week before a retreat to 1.1470.

According to Danske Bank; “We highlight that the UK economy remains fragile and that we see scope for the significant repricing of the BoE to revert to a larger extent than for the ECB, opening for a move higher in EUR/GBP.” (GBP/EUR losses).

Stronger than expected UK GDP data failed to lift the Pound and unease over the economic outlook was amplified by fresh political turmoil late in the week.

The Pound will gain support at times on yield grounds, although sentiment could turn quickly.

RBC commented; “So far, GBP has performed solidly versus its G10 peers since the conflict broke out. That is somewhat surprising since the UK is a significant net oil importer and has been one of the higher yielding G10 currencies. Generally higher yielding currencies suffer in volatile environments. However, recently we have seen a sharp fall in GBP vol, which has made those carry trades attractive once again.”

Prime Minister Starmer was under renewed pressure after fresh allegations surrounding the appointment of Mandelson as UK ambassador to the US while local elections will be held in three weeks.

RBC noted short-term risks; “the May local elections represent a key test of PM Starmer's leadership, and a change in government could shift policy direction.”

Bank of England policy will be a key element and confidence in rate hikes faded during the week.

ING commented; “Governor Bailey recently made a rare and not-so-subtle intervention on market pricing, saying investors were “getting ahead of themselves” in pricing hikes.”

It added; “We took this to mean an April rate hike is highly unlikely. We’re sticking with our call for the Bank to keep rates on hold this year. This marks a small divergence with the ECB, from which our team now expects a hike in June.”

Rabobank noted political and economic risks; "The downgrade in UK economic prospects adds another challenge for the Labour party headed into the May local elections in England and parliamentary elections in Wales and Scotland. A drubbing for the Labour party does increase the chances of a leadership challenge for the PM Starmer."

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TAGS: Pound Euro Forecasts