British Pound to Euro Forecast: GBP Steadies After Burnham Plunge

Modified: Friday, 15 May 2026 14:36 BST - Written by Tim Boyer

STORY LINK British Pound to Euro Forecast: GBP Steadies After Burnham Plunge

The Pound to Euro exchange rate (GBP/EUR) remained trapped below 1.15 as investors closely monitored the escalating political crisis surrounding Prime Minister Keir Starmer.

Although stronger-than-expected UK GDP data provided brief support for Sterling, persistent leadership speculation, elevated gilt yields and concerns over fiscal stability continued to limit confidence in the Pound outlook.

GBP/EUR Forecasts: Consolidates Below 1.15

The Pound to Euro (GBP/EUR) exchange rate has consolidated around 1.1540 with markets on tenterhooks ahead of an expected leadership challenge to Prime Minister Starmer.

There was limited relief from stronger than expected UK GDP data while bond yields also edged lower, but tensions remained extremely high.

MUFG commented on a potential worst-case scenario for the Pound; “if this uncertainty persists and we do see new leadership and a shift left in policy, higher levels through 0.9000 is possible. (GBP/EUR losses to at least 1.11)

Political developments are still likely to dominate in the short term. There are expectations that Health Secretary Streeting will challenge Starmer, but no move has been made yet.

According to Kallum Pickering, chief economist at Peel Hunt; “The UK now looks set for a summer of severe political uncertainty," said, in a note. "Against the already inflationary backdrop of the Iran war, gilt markets will remain especially skittish and equity markets may struggle to make gains short of an (unlikely) quick resolution on the domestic political front."

ING added; “Risk premium on the pound, measured by EUR/GBP short-term overvaluation, remains contained at around 0.3%. This confirms markets aren’t very concerned, but also that downside risks for the pound remain elevated if gilts take a hit from fresh political headlines.”

MUFG discussed the underlying risks; “A recent survey carried out by Survation between 30th April and 5th May revealed that Andy Burnham is by far the most popular potential candidate amongst Labour members.

It added; “The survey indicates that a soft left Labour candidate is most likely to replace Keir Starmer if a leadership contest takes place which would create more unease over UK fiscal risks weighing on gilts and the pound.”

The ONS reported that UK GDP grew 0.3% in March compared with expectations of a small contraction. First-quarter growth was estimated at 0.6% after revised growth of 0.2% for the fourth quarter of 2025.

Investment banks overall treated the data with caution. According to ING; “Ever since 2022, the UK economy has grown much faster in the first quarter than in the rest of the year. And 2026 looks like it'll be no different.”

Capital Economics deputy chief UK economist Ruth Gregory also expressed caution; “In our baseline scenario, the economy doesn’t grow at all in Q2 and Q3. Prolonged political instability is an extra downside risk to our forecasts.”

ONS’s director-general for surveys and economic and social statistics James Benford noted; “We also published in our monthly GDP release today a review of the partial data we have on spending on April which, on balance, point to some weakening going into the second quarter.

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TAGS: Pound Euro Forecasts