British Pound to Euro Forecast: GBP Holds 1.15 Despite UK Payrolls Shock

Modified: Wednesday, 20 May 2026 15:46 BST - Written by Frank Davies

STORY LINK British Pound to Euro Forecast: GBP Holds 1.15 Despite UK Payrolls Shock

The Pound to Euro exchange rate (GBP/EUR) held above the 1.1500 level after Sterling drew temporary relief from easing UK political tensions, although weaker-than-expected labour market data curbed further gains.

Markets reacted positively after Andy Burnham signalled support for existing fiscal rules, but a sharp drop in payrolls and rising unemployment reinforced concerns over the wider UK economic outlook.

GBP/EUR Forecasts: Trades Above 1.15

The Pound to Euro (GBP/EUR) exchange rate surged to highs around 1.1530 on Monday before a limited retreat to 1.1515.

The Pound drew some support from short covering and there was also relief that Greater Manchester Mayor Burnham, who is aiming to replace Prime Minister Starmer stated that he would respect the current fiscal rules. The 10-year yield edged lower to 5.06% from 5.09%.

ING expects renewed selling and is still forecasting a GBP/EUR retreat to 1.1240 on a 12-month view

MUFG commented; “One can assume that the recent negative gilt market reaction is already putting pressure on Andy Burnham to adjust his policy agenda.”

The positive impact was offset by weaker than expected UK jobs data.

The latest labour-market data recorded an increase in the unemployment rate to 5.0% in the three months to March compared with consensus forecasts of an unchanged rate of 4.9%. Payrolls declined 28,000 for March and the ONS estimated a sharp 100,000 slide for April.

Vacancies resumed the decline with a decline to 5-year lows while underlying annual earnings growth slowed to 3.4% in the year to March from 3.6%, although the headline rate increased to 4.1% from 3.9%.

The data will be revised, but ING still commented; “The latest UK jobs report is a reminder that the economy is much less susceptible to 'second round' effects from the incoming energy shock.”

Capital Economics chief UK economist Paul Dales commented; “The sharp weakening in the labour market in April may help to restrain the recent upward march in gilt yields by highlighting that, so far at least, the Iran war is prompting businesses to reduce headcounts rather than raise wage growth to compensate workers for higher inflation.”

He added; “Overall, we all know that CPI inflation will rise over the next 6-12 months, possibly from 3.3% in March to between 4%-4.5%. But the weakening in the labour market suggests that the burst of inflation is more likely to be short-lived than longer-lasting and means the Bank of England may not need to raise interest rates much, if at all.”

According to ING; “We're still forecasting a rate hike in June, but that is far from guaranteed.It’s a close call, and we remain open-minded about next month’s meeting. A lot will also depend on tomorrow’s inflation data.”

Consensus forecasts are for the headline inflation rate to decline to 3.0% from 3.3% due to favourable basis effects with the core rate declining to 2.6% from 3.1%.

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TAGS: Pound Euro Forecasts