British Pound to Euro Forecast: UK Political Risks Keep GBP Under Pressure

Modified: Saturday, 30 May 2026 16:41 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: UK Political Risks Keep GBP Under Pressure

The Pound to Euro exchange rate (GBP/EUR) drifted lower towards the 1.1500 area as investors weighed expectations of further European Central Bank tightening against growing doubts over whether the Bank of England will follow a similar path. Falling energy prices have eased some immediate concerns for the Eurozone economy, while UK political uncertainty continues to cast a shadow over Sterling sentiment.

GBP/EUR Forecasts: Continuing to Edge Lower

The Pound to Euro (GBP/EUR) exchange rate has continued to drift lower to trade around 1.1530. Global energy prices and UK political developments have dominated with markets also monitoring the Euro-Zone inflation data.

Political tensions will intensify next week when parliament will be sitting.

ING does not expect major Pound selling at this stage; “Overall, upside risks for EUR/GBP remain, as some political risk could be repriced. However, absent a particularly hawkish ECB or a dovish Bank of England, the pair may struggle to trade sustainably above 0.870 in the very near term. (GBP/EUR support just below 1.15).

Oil prices have moved lower which will provide an element of relief for the Euro-Zone while traders expect that the ECB will push ahead with a rate hike at the June meeting.

According to MUFG; “Will central banks like the ECB, who are indicating plans to hike reverse those plans at this stage with risk set to remain so high? We think that’s quite unlikely especially if crude oil prices settle not too much lower than here which seems reasonable.”

Danske Bank added; “In the euro area, the minutes came in on the hawkish side, with the ECB framing rate hikes as a question of not if but when. The ECB appears to be gearing up for a potential June hike.”

In contrast, markets are less convinced that the Bank of England will push ahead with rate hikes. In comments on Friday, Governor Bailey stated that there is a case for tolerating inflation temporarily above target.

The political temperature has cooled slightly this week, especially with the House of Commons in recess, although underlying tensions will remain elevated ahead of the June 18th Makerfield by-election.

ING commented; “This mainly reflects decreased media attention on the topic and the difficulty in pinning down the timing of any leadership challenge. With Prime Minister Keir Starmer pledging to fight on, the most plausible window for a new candidate to emerge would be around September, after a leadership challenge through the summer.

It added; “Against a backdrop of heavy external headlines, that risk is not especially easy to price into FX at this stage.”

According to Thierry Wizman, global forex and rates strategist at Macquarie Group; “With the UK under a cloud of uncertainty due to the prospect of a coming leadership election in the Labour Party, we suspect that the euro/sterling would rally if better news emits from the Persian Gulf.”

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TAGS: Pound Euro Forecasts