British Pound to Euro Forecast: GBP Near 1.16 After BoE, ECB

Modified: Friday, 1 May 2026 09:01 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: GBP Near 1.16 After BoE, ECB

The Pound to Euro exchange rate (GBP/EUR) has extended gains to around 1.1590, holding near fresh multi-week highs despite a slight pullback on the day. Sterling remains supported following the latest policy signals from the Bank of England and European Central Bank.

A modest easing in ECB rate expectations has underpinned the Pound, although both currencies remain sensitive to shifting interest rate outlooks and ongoing energy market uncertainty.

GBP/EUR Forecasts: Test 4-Week Best

The Pound-to-Euro rate advanced to test 4-week highs just above 1.1550 after the Bank of England and ECB policy decisions.

Following the meetings, there was a slight dip in ECB rate-hike expectations which helped underpin the Pound, although markets were still pricing in around three rate increases by both banks by year end.

Both the Pound and Euro could be vulnerable if there is a shift in market expectations.

ING still expects political risks will undermine the Pound and expects a retreat to below the 1.1500 level.

The Bank of England (BoE) Monetary Policy Committee (MPC) held interest rates at 3.75% at the latest policy meeting, in line with consensus forecasts.

There was an 8-1 vote for the decision with chief economist Pill backing a rate to 4.00%.

The bank noted there was a high degree of uncertainty over energy prices and the economic impact. The committee outlined three potential scenarios for inflation, second-round effects and the potential response.

Under the most adverse scenario, inflation could hit 6.2% by the first quarter of 2027 and such a move would necessitate a forceful response in raising interest rates.

JP Morgan Global Investment Strategist Madison Faller commented; “Yes, the risks are two-sided. However, the speed and volatility of the repricing, from cuts to hikes, suggests investors are overweighting inflation risks from the energy shock and underweighting downside risks to growth."

She added; "Recent moves in gilts, especially the short to intermediate part of the curve, and sterling look overdone in our view. We think investors should be positioning for that now, not chasing the hawkish narrative.”

ING has, however, changed its position; “After today’s decision, we’re now edging towards a hike in June. It’s certainly not guaranteed, but that’s now narrowly our base case, having previously felt rates would stay on hold through this year.”

MUFG expects pressure on the economy will be important; "We'd still expect eventually to see more of a negative impact, not just on the UK economy, but on the pound as well from these higher energy prices having negative spillover impact on the economy, growth, inflation, and also on the pound itself."

The ECB held the deposit rate at 2.00%, in line with market expectations. According to the central bank, upside inflation risks and downside growth risks have both increased.

Capital Economics Chief Europe Economist Andrew Kenningham commented; “With the price of Brent crude well above $100 per barrel, a rate hike in June would certainly not be a surprise."

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TAGS: Pound Euro Forecasts