British Pound to Euro Forecast: BoE Rate-Hike Bets Lift GBP to Weekly Best

Modified: Thursday, 4 June 2026 17:01 BST - Written by David Woodsmith

STORY LINK British Pound to Euro Forecast: BoE Rate-Hike Bets Lift GBP to Weekly Best

The Pound to Euro exchange rate (GBP/EUR) strengthened to fresh one-week highs above 1.1580 as investors increased bets that the Bank of England may still be forced to raise interest rates later this summer. Hawkish comments from policymakers helped underpin Sterling, while concerns over the economic impact of elevated energy prices continued to weigh on sentiment towards the Euro.

GBP/EUR Forecasts: Advance to 1-Week Highs

The Pound to Euro (GBP/EUR) exchange rate has continued to creep higher and is trading at 1-week highs just above 1.1580, although ranges are still relatively narrow.

Key resistance for the pair remains just above the 1.1600 level.

The Pound benefitted from a fresh swing in momentum towards markets expecting a Bank of England (BoE) rate hike within the next two months.

Higher oil prices could also curb Euro support, although the Pound will be at risk if there is a slide in equities.

Bank of America commented; “We have turned constructive on the GBP, seeing political and fiscal risks as better priced.”

The final service-sector readings for the UK and Euro-zone both improved from the flash readings, but were also in contraction territory with the UK reading at the lowest level since April 2025.

On Tuesday, there were hawkish comments from BoE external member Greene as she fretted over inflation. According to Greene; "I think the case for hiking rates grows as the conflict wears on and believe a tightening in monetary policy over the next few weeks or months may be necessary."

She added; "In my view, the risk of acting, even if inflation proves to be less persistent, is less severe than the risk of failing to act."

MUFG commented; “We continue to see grounds for the BoE hiking and suspect that Megan Greene’s views will grow in popularity the longer the Strait of Hormuz remains closed. Based on this speech there is certainly a risk that Megan Greene could join Chief Economist Huw Pill in voting for a 25bp hike at the next meeting on 18th June.”

MUFG noted that BoE Governor Bailey continued to indicate that the bank had time to assess the situation, especially as financial conditions have tightened.

It added; “A hike certainly seems unlikely in June based on Bailey’s comments but if uncertainty persists much longer it appears likely that the MPC will vote to hike on 30th July.”

There was a mixed message in the latest OECD update. The 2026 GDP forecast has been upgraded to 0.9% from the previous forecast of 0.7%, but the 2027 projection has been cut to 1.1% from 1.3%.

Oil prices have increased again on Wednesday with no progress in securing any deal on Iran with potentially important implications for the Euro.

ING commented; “The euro still faces some downside risks should oil prices break higher again. The Gulf crisis is far from resolved and every day the Strait of Hormuz remains shut brings us closer to the tipping point where inventory drawdowns can no longer offset shut-in production.”

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TAGS: Pound Euro Forecasts