Pound to Euro Week Ahead Forecast: GBP Retreats as UK Risks Build

Modified: Monday, 27 April 2026 07:01 BST - Written by David Woodsmith

STORY LINK Pound to Euro Week Ahead Forecast: GBP Retreats as UK Risks Build

The Pound to Euro exchange rate (GBP/EUR) has eased back towards 1.1530 after briefly hitting three-week highs above 1.1550, with markets increasingly wary over UK political risks and the Bank of England policy outlook.

While higher yields and solid business data have supported Sterling in the short term, expectations of a more hawkish European Central Bank and rising uncertainty ahead of UK elections are reinforcing downside risks for GBP/EUR.

GBP/EUR Forecasts: BoE call next

Nomura is still forecasting that the Pound to Euro (GBP/EUR) exchange rate will slide to 1.11 over the next few months on economic and political grounds.

GBP/EUR strengthened to 3-week highs just above 1.1550 during the week before settling around 1.1530, but many investment banks expect renewed losses.

Nomura commented; “We raise the conviction level on this trade, as we see increasing political challenges in the weeks ahead.”

Prime Minister Starmer remains under major pressure due to the Mandelson affair with expectations of some form of challenge after the May 7th local elections unless the results are much better than expected.

According to Nomura; “If Starmer is ousted, a new leader is unlikely to be seen as being as market friendly as the current PM, which could bring fiscal sustainability risks into focus.”

JP Morgan added "We know that political flare-ups don't weigh on the pound for long, but happy to ride EURGBP higher for now as the story is pretty fresh and adds to the list of woes the UK is facing.”

The Pound drew some support on higher yields while the latest business confidence data was stronger than expected.

There have been further fluctuations in expectations surrounding Bank of England policy. Markets expect no change at the forthcoming April meeting but, at this stage, markets are pricing in a 75% chance of a hike by June which helped underpin the Pound.

Nomura expects the ECB will be more hawkish; “Cyclically, we see recent ECB and BoE comments as differing somewhat, and while a hike on April 30 remains unlikely from either central bank, the ECB seems much closer to pulling the trigger than the BoE.”

According to Barclays; “UK political risks have resurfaced with the latest twist of the Mandelson affair. For now, Gilts are taking their cue from the decline in energy prices, that said, risks from a more expansionary fiscal policy after the elections should weigh on the pound for some time.”

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TAGS: Pound Euro Forecasts